A2. Answer the following multimple choice question No explanation is needed. Only choose the correct answer. 1 mark each. Total Mark 3

1. Which of the following statements is NOT true?

1 point

1. PPP does not necessarily hold, and therefore the exchange rate will not necessarily change in accordance with the inflation differential between the two countries
2. Investors in MNCs can easily hedge exchange rate risk on their own
3. Translation exposure is the exposure of an MNCs consolidated financial statements to exchange rate movement
4. The greater the percentage of an MNCs business conducted by its foreign subsidiaries, the larger the percentage of a given financial statement item that is susceptible to translation exposure.

2. Assume a UK-based subsidiary wants to raise 1,000,000 by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is 0.01. Thus, the MNC needs ___________ rupees to obtain the 1,000,000 needed.

1 point

1. 10,000,000
2. 1,000,000,000
3. 100,000
4. 100,000,000

3. Assume the U.S. dollar is worth 0.55, and the Canadian dollar is worth 0.47. What is the value of the Canadian dollar in U.S. dollars to the nearest cent?

1 point

1. $0.85
2. $1.71
3. $1.17
4. $1.54
5. $0.89