Question

A risk associated with an MNE from Indian participating in outward FDI in Britain is

		fluctuation in the exchange rate between the Indian rupee and the British pound.
		the impact of the United Kingdom exit from the European Union.
		reports that the Reserve Bank of India plans to limit outward FDI.
		all the above.

The Business Roundtable is an association with members who are leaders of large technology firms, manufacturing firms, airlines, institutional investors and others. In August, the Business Roundtable changed its statement of the purpose of a corporation to consider “all stakeholders” and not only the obligation to maximize value (profit) for shareholders. This shift in policy reflects a greater sense of

		congressional overreach.
		corporate governance.
		corporate social responsibility.
		free enterprise.

Strategic hedging emphasizes the use of forward contracts and swaps to limit currency risks.

True

False

Answer 1

Its True, because Companies use forward contracts to hedge their risk against foreign exchange. For example, a company based in the U.S. incurs costs in dollars for labor and manufacturing. It sells to European clients who pay in euros. The company has a lead time of six months to supply the goods. In this case, the company is at risk from uncertain market fluctuation of exchange rates. The company uses a forward contract to sell the product six months later at today's exchange rate.