A MNCs risk exposure is relatively high if two foreign currencies are negatively correlated and one...
A MNCs risk exposure is relatively high if two foreign
currencies are negatively correlated and one is an inflow while the
other is an outflow
of the same amount.
O True
O False
Homework Answers
The given statement is TRUE because we can say that when there is a multinational corporation which has this exposure in both dollars and Euros and when dollars will be going up, euros will be going down and it will be reflecting a negative correlation.
If we assume that the company has Dollars receivables and Euros payable, and the value of Dollar decreases in comparison of euros, thenreceivables in dollars will increase and payables in euros will increase, the company will be having to take higher risk because it is exposed to double risk.
The given statement is TRUE
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