CH.10 535 1&16

PLEASE EXPLAIN IN DETAIL:

1. Transaction versus Economic Exposure Compare and contrast transaction exposure and economic exposure. Why would an MNC consider examining only its “net” cash flows in each currency when assessing its transaction exposure?

16. Measuring Changes in Economic Exposure Toyota Motor Corp. measures the sensitivity of its exports to the yen exchange rate (relative to the U.S. dollar). Explain how regression analysis could be used for such a task. Identify the expected sign of the regression coefficient if Toyota primarily exports to the United States. If Toyota established more plants in the United States, how might the regression coefficient on the exchange rate variable change?

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