CHAPTER 10 QUIZ 2

CHAPTER 10 QUIZ 2
Assessing Transaction Exposure. Your employer, a large MNC, has asked you to assess its
transaction exposure. Its projected cash flows are as follows for the next year:
Currency Total Inflow Total Outflow
Current Exchange
Rate in U.S. Dollars
Danish krone (DK) DK50,000,000 DK40,000,000 $.15
British pound (£) £2,000,000 £1,000,000 $1.50
Assume that the movements in the Danish krone and the pound are highly correlated. Provide your
assessment as to your firm- degree of transaction exposure (as to whether the exposure is high or
low). Substantiate your answer.

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