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5. A US MNC has two cash flows. The first is a net cash inflow in the yen and the other is a net cash outflow in the peso. As
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Answer #1

a) This is false. As the firm as 2 currencies positively correlated to US dollar, both will move on same direction (range may differ). Hence firm does not have a "Relatively high" level of transaction exposure. It does have a "some" level of exposure but not a high one

b) This is False. It depends on the extent the yen and peso are correlated to dollar and the amount of money we need to give/take. Company will definitely be impacted (can be positive or negative) when exchange rate changes/fluctuate. Both rates will move in same direction (this is true) but that movement will definitely impact the firm.

c) This is False. Both rates will move in opposite direction (this is false). Infact both rates will move in same direction and that movement will definitely impact the firm.

d) This is False. It depends on the extent the yen and peso are correlated to dollar and the amount of money we need to give/take.

Hence correct option is (E)

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