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problem: Rolls-Royce, the British jet engine producer, sells engines to United State airlines & buys parts from United State companies. Assume it has accounts receivable of $1.5 billion and accounts payable of $740 million. It also borrowed $600 million. The current spot rate is $1.5128/£.

[A] find out Rolls-Royce's dollar transaction exposure in dollar terms? [In pound terms]

[B] Assume the pound appreciates to $1.7642/£. find out Rolls-Royce's gain or loss, in pound terms, on its dollar transaction exposure?

Basic Finance, Finance

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  • Reference No.:- M921504

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