Your employer, a large MNC, has asked you to assess its transaction exposure. Its projected cash flows are as follows for the next year: Danish krone inflows equal DK38,000,000, while outflows equal DK30,000,000; British pound inflows equal £3,000,000, while outflows equal £2,000,000. The spot rate of the krone is $0.16, and the spot rate of the pound is $1.32. Assume that the movements in the Danish krone and the British pound are highly correlated.

(1) Is the exposure high, low, or neutral? Substantiate your answer.

(2) How might the company deal with any exposure?

Answer rating: 100% (QA)

1 The DK and the values are aligned through the tandem of ... View the full answer