Question

(TCO I) If a firm has more foreign currency assets than liabilities, and no other foreign currency transactions, it has

positive net exposure.

negative net exposure.

fully balanced position.

zero net exposure.

Answer 1

Solution:
	Answer is 1st option Positive Net Exposure
Working Notes:
	As firm has more foreign currency assets than liabilities, its net exposure will be in Foreign currency assets.
	Negative net exposure is when firm have more foreign currency liabilities than its foreign currency assets.
	In fully balanced position , firm have equal foreign currency assets & liabilities , which balance each other all the time of appreciation or depreciation of foreign currency.
	zero net exposure means have neither foreign currency assets nor liabilities.
	In our case is Positive Net Exposure as firm have more foreign currency assets than its foreign currency liabilities.
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