Explanation:
If the US dollar per euro exchange rate strengthens against the Euro, it will take fewer dollars to convert the Euro into the US dollar. For instance, if the initial EUR/USD exchange rate were 1.5 when the sales of Armada were 100 Euros, the total revenue in US dollars would be USD150. If the USD strengthens against the Euro from 1.5 to 1.35, the revenue will fall from $150 to $135.
Option A is incorrect. If the US dollar strengthens, then the revenue is expected to fall.
Option C is incorrect. If the US dollar weakens, it will take more dollars to convert the Euros into USD. Thus, the revenue will rise.
Option D is incorrect. We expect a change in revenue whenever there is a change in exchange rates.
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Q.13 Armada is an American tech company that manufactures internet routers with artificial intelligence. These routers can automatically connect to the employees of certain organizations without password verification. Armada sells its products worldwide, but its largest market is Germany, and its sales are denominated in Euros. Which of the following options is correct?
A
If the US dollar strengthens, the revenue of Armada will rise.
B
If the US dollar strengthens, the revenue of Armada will fall.
C
If the US dollar weakens, the revenue of Armada will fall.
D
The revenue of Armada will remain unaffected as the sales are denominated in Euros.