When exchange rates change

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Reference no: EM132057375

1. Which of the following is true?

An exporter can shift exchange rate risk to their customers by invoicing in their customer's local currency.

A 3-year swap contract can be viewed as a portfolio of 3 forward contracts with maturities of 1, 2, and 3 years. One important exception is that the forward price is the same for the swap contract but not for the forward contracts.

Contingent exposure, which refers to a situation in which the firm may or may not be subject to exchange exposure, can best be hedged with money market hedging.

An MNC seeking to reduce transaction exposure with a strategy of leading and lagging can probably employ the strategy more effectively with customers or outside suppliers than with intra firm payables and receivables.

2. When exchange rates change,

this can alter the operating cash flow of a domestic firm.

this can alter the competitive position of a domestic firm.

this can alter the home currency values of a multinational firm's assets and liabilities.

All of the above.

Reference no: EM132057375

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