Which of the Following About Transaction Exposure Is NOT Correct

question 14

Multiple Choice

Which of the following about transaction exposure is NOT correct?

• A) An Australian company that exports to Japan faces transaction exposure for its accounts receivable.
• B) If an Australian company exports to the USA but imports other USA goods for the same value, then it has a natural hedge if the two payment dates are the same.
• C) If an Australian company has exposures in two currencies with correlation coefficient of 0.96 then the company has a natural hedge.
• D) A firm needs to calculate the net amount of cash inflows and outflows denominated in different currencies, based on the timing of cashflows.

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Definitions:

Orbicularis Oculi

A muscle around the eye that allows the eyelids to close.

Zygomaticus

The zygomaticus refers to two facial muscles, the zygomaticus major and minor, which extend from the cheekbone to the corners of the mouth and are responsible for raising the upper lip, contributing to facial expressions such as smiling.

Sternocleidomastoid

A significant muscle in the neck that is involved in the rotation and flexion of the head.

Tibialis Anterior

A muscle in the lower leg that is involved in dorsiflexion and inversion of the foot.