Consider a U Ignoring Transaction Exposure in the Yen,the Translation Exposure Will Indicate

question 29

Multiple Choice

Consider a U.S.-based MNC with manufacturing activities in Japan.The result of a change in the ¥-$ exchange rate on the assets and liabilities of the consolidated balance sheet is $$\begin{array} { l l l } \text { Exposed assets } & \text { ¥ } & 700,000,000 \\\text { Exposed liabilities } & \text { ¥ } & 500,000,000\end{array}$$ Ignoring transaction exposure in the yen,the translation exposure will indicate a possible need for a "balance sheet hedge" of

• A)¥200,000,000 more liabilities denominated in yen.
• B)¥200,000,000 less assets denominated in yen.
• C)¥200,000,000 more liabilities denominated in yen or ¥200,000,000 less assets denominated in yen.
• D)none of the options

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Definitions:

Bailment

describes a legal relationship in which one party temporarily relinquishes possession but not ownership of a piece of property to another party under agreement.

Carport

A covered structure used to provide limited protection to vehicles, primarily from rain and snow, which unlike a garage, is open on two or more sides.

Liable

Refers to being legally responsible for something, usually implying a duty to make restitution for harm or damage caused.

Salvage

A reward given to persons who voluntarily assist a sinking ship to recover its cargo from peril or loss.