Assume That Mill Corporation, a U $\mu$ _t
Where the Term on the Left-Hand Side Is the Following

question 65

Multiple Choice

Assume that Mill Corporation, a U.S.-based MNC, has applied the following regression model to estimate the sensitivity of its cash flows to exchange rate movements:
PCF_t = a₀ + a₁et + $\mu$ _t
Where the term on the left-hand side is the percentage change in inflation-adjusted cash flows measured in the firm's home currency over period t, and et is the percentage change in the exchange rate of the currency over period t. The regression model estimates a coefficient of a₁ of 2. This indicates that:

• A) if the foreign currency appreciates by 1%, Mill's cash flows will decline by 2%.
• B) if the foreign currency appreciates by 1%, Mill's cash flows will decline by .2%.
• C) if the foreign currency depreciates by 1%, Mill's cash flows will increase by 2%.
• D) if the foreign currency depreciates by 1%, Mill's cash flows will decline by 2%.
• E) none of the above

---

Definitions:

Surgical Skills Exam

An assessment designed to evaluate a surgeon's competency in performing surgical procedures.

MMPI

The Minnesota Multiphasic Personality Inventory, a standardized psychometric test of adult personality and psychopathology used to diagnose mental disorders.

Purchase Choice

The decision made by consumers regarding which products or services to buy.

Brands of Jam

Various companies or labels under which jam, a sweet spread made from fruit and sugar, is marketed and sold.