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Transaction exposure and the economic exposure

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Business Idea: Cosmetics company in the US that will produce and export products to Mexico.

Recall that it was assumed that your receivables would be denominated in Mexican Pesos. For this question only, assume that you could switch your pricing policy so that the receivables would be denominated in dollars instead of Pesos.

How would this switch affect the transaction exposure and the economic exposure of your business? Explain the conditions that could still cause the performance of your business to be affected by exchange rate movements.

Reference no: EM132719306

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