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 will be exposed to exchange rate losses if the yen increases in value relative to the
dollar.
B) The MNC will be exposed to exchange rate losses if the yen declines in value relative to the
dollar.
C) The MNC is not exposed to exchange rate risk because it holds both assets and liabilities
denominated in yen.
D) The MNC can avoid exchange rate risk by paying its Japanese liabilities with dollars.
A
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