Minimizing Exposure Lola Co. (a U. S. firm) expects to receive 10 million euros in 1 year. It does not plan to hedge this transaction with a forward contract or other hedging techniques. This is its only international business, and it is not exposed to any other form of exchange rate risk. Lola Co. plans to purchase materials for future operations, and it will send its payment for these materials in 1 year. The value of the materials to be purchased is about equal to the expected value of the receivables. Lola Co. can purchase the materials from Switzerland, Hong Kong, Canada, or the United States. Another alternative is that it could also purchase one-fourth of the materials from each of the four countries mentioned in the previous sentence. The supplies will be invoiced in the currency of the country from which they are imported. The movements of the euro and the Swiss franc against the dollar are highly correlated and will continue to be highly correlated. The Hong Kong dollar is tied to the U. S. dollar and you expect that it will continue to be tied to the dollar. The movements in the value of Canadian dollar against the U. S. dollar are independent of (not correlated with) the movements of other currencies against the U. S. dollar. Lola Co. believes that none of the sources of the imports would provide a clear cost advantage.

Required:
Which alternative should Lola Co. select for obtaining supplies that will minimize its overall exchange rate risk?

Lola Co. should purchase every one of its provisions from Switzerland. Because the developments of the Euro and the Swiss franc against the dollar are profoundly associated. The installments and receipts will both move a similar way. Therefore the Lola Co. select for obtaining supplies will limit the general Exchange rate risk.

answer; i believe that the correct answer is (d)when the products are consumed or

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.