Consider a U.S.MNC with three subsidiaries and the following foreign exchange transactions shown at left.Use BILATERAL netting to reduce the number of foreign exchange transactions by half. 
Definitions:
Contract
A legally binding agreement between two or more parties that is enforceable by law.
Income Effect
The variation in a person's or economy's earnings and its impact on the demand levels for a particular product or service.
Substitution Effect
Describes the change in the consumption of goods as a result of changes in their relative prices, holding the consumer's level of utility constant.
Hourly Wage
The amount of money paid to an employee for each hour worked, often set by legal minimum wage laws or by agreement between employer and employee.
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