Consolidated earnings-euro movement

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Reference no: EM13133887

Mercury Co. has a subsidiary based in Italy and is exposed to translation exposure. Mercury forecasts that its earnings next year will be €10 million. Mercury decides to hedge the expected earnings by selling €10 million forward. During the next year, the euro appreciated. Mercury's consolidated earnings were ____ affected by the euro's movement, and Mercury's hedge position was ____ affected by the euro's movement.

a. favorably; favorably

b. favorably; adversely

c. adversely; favorably

d. adversely; adversely

Reference no: EM13133887

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