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J&L Co. is a U.S.-based MNC with net cash inflows of euros and net cash inflows of British pounds. These two currencies are highly correlated
J&L Co. is a U.S.-based MNC with net cash inflows of euros and net cash inflows of British pounds. These two currencies are highly correlated in their movements against the dollar. Magent Co. is a U.S.-based MNC that has the same level of net cash flows in these currencies as J&L Co. except that its euros represent net cash outflows. Which firm has a higher exposure to exchange rate risk?
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the firms have about the same level of exposure
J&L Co.
Magent Co.
neither firm has any exposure
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