1)Subsidiary A of Mega Corporation has net inflows in Australian dollars of A$10,000,000, while Subsidiary B has net outflows in Australian dollars of A$10,500,000. To hedge its position in A$, what should Mega Corporation do?

A.Buy A$500,000 forward

B.Sell A$500,000 forward.

C.Buy call option for A$250,000.

2)Which of the following is/are true?

A.Translation exposure normally directly affect the profit and loss of a MNC

B.Transaction exposure normally directly affect the profit and loss of a MNC

C.Economic exposure have no impact on the future of the MNC

D.MNC should hedge every open positions of foreign currency

E.Only MNCs have economic exposure

F.Only MNCs have transaction exposure

3) ABC is an US-based MNC. It has a net cash flow of + CAD700,000 due in the next 30 days. It hedges this position by forward with a forward rate of USD1.1/CAD.

At the end of the 30-day period, spot market rate is USD1.05/CAD.

How much USD does this company get?

4)ABC is an US-based MNC. It has a net cash flow of + CAD700,000 due in the next 30 days. It hedges this position by forward with a put option with exercise price of USD1.07/CAD and the premium is USD0.02/CAD . At the end of the 30-day period, spot market rate is USD1.12/CAD. How much USD does this company get (after subtracting premium)?