The Following Regression Model Was Run by a U $$P C F_{t}=a_{0}+a_{1} e_{t}+\mu_{t}$$

question 19

Multiple Choice

The following regression model was run by a U.S.-based MNC to determine its degree of economic exposure as it relates to the Australian dollar and Sudanese dinar (SDD) :
$$P C F_{t}=a_{0}+a_{1} e_{t}+\mu_{t}$$
where the term on the left-hand side is the percentage change in inflation-adjusted cash flows measured in the firm's home currency over period $t$ , and $e_{t}$ is the percentage change in the exchange rate of the currency over period $t$ . The regression was run over two subperiods for each of the two currencies, with the following results:

Based on these results,which of the following statements is probably not true?

• A) The MNC was more sensitive to movements in the Australian dollar than in the dinar in the earlier subperiod.
• B) The MNC was more sensitive to movements in the dinar than in the Australian dollar in the more recent subperiod.
• C) The MNC probably had more outflows than inflows in Australian dollars in the earlier subperiod.
• D) The MNC probably had more inflows than outflows denominated in dinar in the more recent subperiod.
• E) All of the above are true.

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