Aggie Co. produces chemicals. It is a major exporter to Europe, where its main competition is from other U.S. exporters. All of these companies invoice their products in U.S. dollars. Is Aggies transaction exposure likely to be significantly affected if the euro strengthens or weakens? Explain. If the euro weakens for several years, can you think of any change that might occur in the global chemicals market?

Cieplak, Inc., is a U.S.-based MNC that has expanded into Asia. Its U.S. parent exports goods to some Asian countries, with its exports denominated in the Asian currencies. It also has a large subsidiary in Malaysia that serves that market. Offer at least two reasons related to exposure to exchange rates that explain why Cieplaks earnings were reduced during the Asian crisis in 1997.

You use todays spot rate of the Brazilian real to forecast the spot rate of the real for one month ahead. Todays spot rate is $0.4558. Use the VaR method to determine the maximum percentage loss of the Brazilian real over the next month based on a 95 percent confidence level. Use the spot exchange rates at the end of each of the last six months to conduct your analysis. Forecast the exchange rate that would exist under these conditions.