Assessing Transaction Exposure Your employer, a large MNC, has asked you to assess its transaction exposure. Its
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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. Danish krone inflows equal DK50,000,000 while outflows equal DK40,000,000.
British pound inflows equal £2,000,000 while out flows equal £1,000,000. The spot rate of the krone is
$.15,while the spot rate of the pound is $1.50. Assume that the movements in the Danish krone and the British pound are highly correlated. Provide your assessment as to your firm’s degree of transaction exposure (as to whether the exposure is high or low).
Substantiate your answer.
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