1) One of the corporate motives for forecasting exchange rates is deciding whether the MNCs foreign subsidiaries should remit earnings to their parents. Suppose an analyst of a Filipino parent company with subsidiaries across the US strongly believes that the peso will weaken considerably within the next three months. Which of the following should be the recommendation of the analyst to the managers?

The parent company should ask the US subsidiaries to remit earnings as soon as possible given the expected peso depreciation.

The parent company should enter into a three-month long USDPHP forward in order to protect itself from FX risks.

The parent company should wait for three months before asking the subsidiaries to remit earnings to maximize peso value.

The parent company should be indifferent on the timing of the earnings remittance since the cash flows are not affected by FX.

2)The economic data of country X (with currency TWC) shows that interest rates are high, while inflation remains low. Also, TWCs forward rate exhibits a discount which is attributable to the countrys relatively high interest rates. A trader of a local FX bank decided to sell TWC since it fell below the threshold level based on recent TWC movement. Which of the following forecast technique did the analyst use?

		Fundamental
		Market-based
		Regression
		Technical

3)In the analysis of the impact of cash flow and correlation conditions on an MNCs FX exposure, which of the following will result in the highest exposure considering the same amount in both currencies?

		Net inflows in two currencies, which has a correlation of zero.
		Net inflows in two currencies, which are negatively correlated.
		An inflow in one currency and an outflow in another currency, which are highly correlated.
		An inflow in one currency and an outflow in another currency, which are negatively correlated.

4)

A start-up team led by its CEO Seo Dal-Mi and her boyfriend CTO Nam Do-San is analyzing the dataset on economic indicators relating to the Korean Won (KRW). They developed an AI system which automatically trades KRW with any other currency in less than a split second. Nam Do-San believes that this can be done by only incorporating the differences in inflation rates across countries. Which of the following is most likely the result of the AI system?

		The AI system will fail since inflation alone cannot forecast exchange rate movements.
		The AI system will work since this has already been proven by the Purchasing Power Parity.
		The AI system will work since this is supported by both the Purchasing Power Parity and the International Fischer Effect.
		The AI system will fail since inflation should never be used as an input in determining exchange rates due to its unpredictability and volatility.