Elaborate on the temporal method of translation FE exposure. Define it and describe how it treats balance sheet, income statement and stockholders equity items.

Transaction and Translation exposure

ESSAYS

*A. We fear a revaluation of the currency of the US affiliate the Japanese Yen.
1) Explicate how the USA should hedge its translation exposure through a balance sheet or forward hedge.
2) Discuss the implications of US hedging actions.

C. Elaborate on the temporal method of translation FE exposure. Define it and describe how it treats balance sheet, income statement and stockholders equity items.

D. Expound on the current rate method of FE exposure. Define it and describe how it treats income statement, balance sheet and stockholders equity items.

E. Explicate hedging translation exposure through the balance sheet and forward in the current rate and the temporal method. Evaluate them as a hedging tool.