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    Exchange Rate Exposure in Firms

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    Some people believe the best way to manage exchange rate exposure is to do nothing. They believe that currencies are unpredictable. They believe trying to manage currency risk is useless and a waste of money because of this unpredictability.

    Explain how exchange rate exposure may create risks and opportunities for a domestic and multinational firms.

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    See the attached file.

    Some people believe the best way to manage exchange rate exposure is to do nothing. They believe that currencies are unpredictable. They believe trying to manage currency risk is useless and a waste of money because of this unpredictability.

    Explain how exchange rate exposure may create risks and opportunities for a domestic and multinational firms

    The exchange rate risk is associated with the future cash flow streams in foreign currency. If the net exposure is positive in foreign currency, the firm will be better off if the foreign currency appreciates with respect to Dollar, as it will be able to fetch more value from its operations. Here, we should understand that merchandise is produced in home country and transferred to ...

    Solution Summary

    This solution provides an explain for how exchange rate exposure could create risks and opportunities for firms.

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