FIN 6420 CH 10 | ACE EVERY QUIZ | CONFIDENCE
BACKED BY ACCURACY!
Generally, mncs with less foreign revenues than foreign costs will be ____ affected by a
____ foreign currency.
A. Favorably; stronger
B. Favorably; weaker
C. Not; stronger
D. Not; weaker - Answer: favorably; weaker
Lazer Co. Is a U.S. firm that exports computers to Belgium invoiced in euros and to Italy
invoiced in dollars. Additionally, Lazer Co. Has a subsidiary in Korea that produces
computers in South Korea and sells them there. Lazer also has competitors in different
countries. Lazer Co. Is subject to:
A. Transaction exposure.
B. Economic exposure.
C. Translation exposure.
D. All of these are correct. - Answer: all of these are correct
Which of the following is not a form of exposure to exchange rate fluctuations?
A. Transaction exposure
B. Economic exposure
C. Translation exposure
D. Credit exposure - Answer: credit exposure
1
APPHIA - Crafted with Care and Precision for Academic Excellence.
, Vada, Inc. Exports computers to Australia invoiced in U.S. dollars. Its main competitor is
located in Japan. Vada is subject to:
A. Economic exposure.
B. Transaction exposure.
C. Translation exposure.
D. Economic and transaction exposure. - Answer: a. Economic exposure
Which of the following operations benefits from appreciation of the firm's local currency?
A. Borrowing in a foreign currency and converting the funds to the local currency prior to
the appreciation
B. Receiving earnings dividends from foreign subsidiaries
C. Purchasing supplies locally rather than overseas
D. Exporting to foreign countries - Answer: borrowing in a foreign currency and
converting the funds to the local currency prior to the appreciation
Jacko Co. Is a U.S.-based MNC with net cash inflows of euros and net cash inflows of
Sunland francs. These two currencies are highly negatively correlated in their
movements against the dollar. Kriner Co. Is a U.S.-based MNC that has the same
exposure as Jacko Co. In these currencies, except that its Sunland francs represent
cash outflows. Which firm has a high exposure to exchange rate risk?
A. Jacko Co.
B. Kriner Co.
C. The firms have about the same level of exposure.
D. Neither firm has any exposure. - Answer: Kriner Co
Currency correlations are generally negative. T/F? - Answer: FALSE
2
APPHIA - Crafted with Care and Precision for Academic Excellence.
BACKED BY ACCURACY!
Generally, mncs with less foreign revenues than foreign costs will be ____ affected by a
____ foreign currency.
A. Favorably; stronger
B. Favorably; weaker
C. Not; stronger
D. Not; weaker - Answer: favorably; weaker
Lazer Co. Is a U.S. firm that exports computers to Belgium invoiced in euros and to Italy
invoiced in dollars. Additionally, Lazer Co. Has a subsidiary in Korea that produces
computers in South Korea and sells them there. Lazer also has competitors in different
countries. Lazer Co. Is subject to:
A. Transaction exposure.
B. Economic exposure.
C. Translation exposure.
D. All of these are correct. - Answer: all of these are correct
Which of the following is not a form of exposure to exchange rate fluctuations?
A. Transaction exposure
B. Economic exposure
C. Translation exposure
D. Credit exposure - Answer: credit exposure
1
APPHIA - Crafted with Care and Precision for Academic Excellence.
, Vada, Inc. Exports computers to Australia invoiced in U.S. dollars. Its main competitor is
located in Japan. Vada is subject to:
A. Economic exposure.
B. Transaction exposure.
C. Translation exposure.
D. Economic and transaction exposure. - Answer: a. Economic exposure
Which of the following operations benefits from appreciation of the firm's local currency?
A. Borrowing in a foreign currency and converting the funds to the local currency prior to
the appreciation
B. Receiving earnings dividends from foreign subsidiaries
C. Purchasing supplies locally rather than overseas
D. Exporting to foreign countries - Answer: borrowing in a foreign currency and
converting the funds to the local currency prior to the appreciation
Jacko Co. Is a U.S.-based MNC with net cash inflows of euros and net cash inflows of
Sunland francs. These two currencies are highly negatively correlated in their
movements against the dollar. Kriner Co. Is a U.S.-based MNC that has the same
exposure as Jacko Co. In these currencies, except that its Sunland francs represent
cash outflows. Which firm has a high exposure to exchange rate risk?
A. Jacko Co.
B. Kriner Co.
C. The firms have about the same level of exposure.
D. Neither firm has any exposure. - Answer: Kriner Co
Currency correlations are generally negative. T/F? - Answer: FALSE
2
APPHIA - Crafted with Care and Precision for Academic Excellence.
