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:

Articles of Incorporation

Legal documents filed with the state government to legally establish a corporation.

Proper Consideration

The requirement in contract law that something of value must be exchanged between the parties to form a valid contract.

Incorporeal Property

Refers to intangible assets owned by an individual or corporation, such as intellectual property, securities, and rights to financial accounts.

Nonprofit Corporation

A type of organization that operates without the purpose of making a profit, typically focusing on charitable, educational, or social missions.