Jacko Plc Is a UK-Based MNC with Net Cash Inflows

question 38

Multiple Choice

Jacko plc is a UK-based MNC with net cash inflows of Singapore dollars and net cash inflows of Sunland francs. These two currencies are highly negatively correlated in their movements against the pound. Kriner plc is a UK-based MNC that has the same exposure as Jacko plc in these currencies, except that its Sunland francs represent cash outflows. Which firm has a high exposure to exchange rate risk?

• A) Jacko plc
• B) Kriner plc
• C) The firms have about the same level of exposure.
• D) Neither firm has any exposure.

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Definitions:

Vertical Axis

The y-axis in a graph, which typically shows the range of values for the variable measured.

Pure Competition

A market structure featuring a large number of small firms selling identical products, with no single firm able to influence market price.

Differentiated Products

Goods and services that are distinct from those offered by competitors due to unique characteristics, branding, quality, or features.

Market Price

The current value at which an asset or service can be bought or sold in an open market.