If an MNC Expects Cash Inflows of Equal Amounts in Two

question 32

Multiple Choice

If an MNC expects cash inflows of equal amounts in two currencies, and the two currencies are ____ correlated, the MNC's transaction exposure is relatively ____.

• A) negatively; high
• B) negatively; low
• C) positively; low
• D) none of the above

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Definitions:

Stock Price

The cost of purchasing a share of a company in the stock market, which fluctuates based on supply and demand dynamics.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a specified price within a specific time frame.

Premium

The amount paid for a product or service beyond its intrinsic value, often due to insurance, quality, or demand factors.

Profit

The financial gain achieved when the revenues generated from an activity exceed the expenses, costs, and taxes associated with that activity.