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Question
The following are the net currency positions of a U.S. FI (stated in U.S. dollars).
How would you characterize the FI's risk exposure to fluctuations in the British pound to dollar exchange rate?
A. The FI is net short in the British pound and therefore faces the risk that the British pound will rise in value against the U.S. dollar.
B. The FI is net short in the British pound and therefore faces the risk that the British pound will fall in value against the U.S. dollar.
C. The FI is net long in the British pound and therefore faces the risk that the British pound will fall in value against the U.S. dollar.
D. The FI is net long in the British pound and therefore faces the risk that the British pound will rise in value against the U.S. dollar.
E. The FI has a balanced position in the British pound.
Answer
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