As opposed to transaction exposure, managing economic exposure involves developing a ________ solution.

Related MCQs

• Multinational firms face exposure to many different types of international risk. Which of the following is not a type of exposure?
• With regard to hedging translation exposure, translation losses _______; and gains on forward contracts used to hedge translation exposure _______.
• If an MNC expects cash inflows of equal amounts in two currencies, and the two currencies are ___________ correlated, the MNC's transaction exposure is relatively ___________.
• Which of the following is the least effective way of hedging transaction exposure in the long run?
• Which of the following is the least effective way of hedging transaction exposure in the long run?
• An effective way for an MNC to assess its economic exposure is to look at the firm's:
• Translation exposure reflects:
• Diz ltd. is a UK-based MNC with net cash inflows of euros and net cash inflows of Swiss francs. These two currencies are highly correlated in their movements against the dollar. Yanta ltd is a UK-based MNC that has the same level of net cash flows in these currencies as Diz ltd except that its euros represent net cash outflows. Which firm has a higher exposure to exchange rate risk?
• Magent ltd. is a UK company that has exposure to the Swiss franc (SF) and Danish kroner (DK). It has net inflows of SF 200 million and net outflows of DK 500 million. The present exchange rate of the SF is about £0.22 while the present exchange rate of the DK is £0.05. Magent ltd. has not hedged these positions. The SF and DK are highly correlated in their movements against the pound. If the pound weakens, then Magent ltd. will:
• The __________ the percentage of an MNC's business conducted by its foreign subsidiaries, the _________ the percentage of a given financial statement item that is susceptible to translation exposure.