Question

A U.S. based MNC can be subject to transaction exposure if the corporation:

a.	Buys supplies or sells goods on open account
b.	Borrows or lends
c.	Has underperformed foreign exchange forward contract
d.	Has assets and liabilities denominated in $

Answer 1

Solution:

A U.S. based MNC can be subject to transaction exposure if the corporation:

a.	Buys supplies or sells goods on open account - (Incorrect) (Buy and sell goods not relate to transaction exposure, its ussual part of Business operations)
b.	Borrows or lends - (Incorrect) (Borrow or lend also not relate to transaction exposure, , its ussual part of Business operations)
c.	Has underperformed foreign exchange forward contract - (Correct) (If the Exchange Forward contract are underperformed then in such case the MNC will have transaction exposure, since transaction ecposure is the exposure that relates to foreign exchange fluctuations)
d.	Has assets and liabilities denominated in $ - (Incorrect) (Assets and Liabilities already in USD are not exposed to foreign exchange)