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29 March, 09:44

If the European subsidiary of a U. S. firm has net exposed assets of euro 200,000, and the euro increases in value from $1.22/euro to $1.26/euro the U. S. firm has a translation: A. loss of $8,000. B. gain of $8,000. C. loss of euro 252,000. D. gain of $252,000.

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  1. 29 March, 13:32
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    B. Gain $8,000

    Explanation:

    The calculation of exchange translation is shown below:-

    Old exchange rate = Net exposed assets * Value of Euro

    = 200,000 * $1.22

    = $244,000

    New value in euro = Net exposed assets * Increased exchange rate

    = 200,000 * $1.26

    = $252,000

    Translation Profit = New value in euro - Old exchange rate

    = $252,000 - $244,000

    = $8,000
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