Multiple Choice
A U.S.-based multinational corporation (MNC) currently has an investment portfolio that includes Japanese securities valued at 10,000,000 yen.The company also owes its Japanese suppliers 12,000,000 yen.Which of the following statements is MOST correct?
A) The MNC is not exposed to exchange rate risk because it holds both assets and liabilities denominated in yen.
B) The MNC will be exposed to exchange rate losses if the yen declines in value relative to the dollar.
C) The MNC will be exposed to exchange rate losses if the yen increases in value relative to the dollar.
D) The MNC can avoid exchange rate risk by paying its Japanese liabilities with dollars.
Correct Answer:
Verified
Correct Answer:
Verified
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