1. Would you describe the exposure of the Sports Exports Company to exchange rate risk as transaction exposure? Economic exposure? Translation exposure?

2. Logan is considering a change in the Sports Exports Company’s pricing policy such that the importer must pay in dollars, so that Logan will not have to worry about converting pounds to dollars every month. If implemented, would this policy eliminate the company’s transaction exposure? Would it eliminate the company’s economic exposure? Explain.

3. If Jim decides to implement the policy described in the previous question, how would the Sports Exports Company be affected (if at all) by appreciation of the pound? By depreciation of the pound? Would these effects on the company differ if Jim retained the original policy of pricing the exports in British pounds?