Question
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
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?
A) The parent company should ask the US subsidiaries to remit earnings as soon as possible given the expected peso depreciation.
B) The parent company should enter into a three-month long USDPHP forward in order to protect itself from FX risks.
C) The parent company should wait for three months before asking the subsidiaries to remit earnings to maximize peso value.
D) The parent company should be indifferent on the timing of the earnings remittance since the cash flows are not affected by FX.
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