If the Parent Firm and All Subsidiaries Denominate All Exposed

question 50

Multiple Choice

If the parent firm and all subsidiaries denominate all exposed assets and liabilities in the parent's reporting currency this will ________ exposure but each subsidiary would have ________ exposure.

• A) maximize translation; no transaction
• B) eliminate translation; transaction
• C) maximize transaction; no translation
• D) eliminate transaction; translation

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Definitions:

Compounded Monthly

Calculating interest on a principal sum along with any accumulated interest of the previous periods with each cycle occurring every month.

Trust Fund

A legal arrangement where assets are held by a trustee for the benefit of another person or group.

Compounded Monthly

A method of calculating interest in which the interest earned each month is added to the principal, and the following month's interest is calculated on the new total.

Perpetuity

A financial instrument that pays a fixed amount of cash flow indefinitely.