a. In early 2018, a German aircraft company bought airline parts from an American largest aerospace company worth $365 million. The product was finance by the U.S bank with a 7- year loan. The loan has no interest or principal due until the coming year.  

 

Required:

 

Determine the net impact of this sale on the U.S current account, capital account and overall balance of payment for the year 2018. (5 marks)  

b. DKNY mostly contracts out its production to foreign manufacturers. By doing so, will 

DKNY face any transaction exposure and how will the company go about hedging the risk? (7 marks)

Answer rating: 100% (QA)

SOLUTION a The net impact of the sale on the US current account capital account and overall balance of payments for the year 2018 can be calculated as ... View the full answer