Diz Ltd Is a UK-Based MNC with Net Cash Inflows

question 17

Multiple Choice

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?

• A) Diz ltd
• B) Yanta ltd
• C) The firms have about the same level of exposure.
• D) Neither firm has any exposure.

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