Assessing Transaction Exposure 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 DK50,000,000, while outflows equal DK 40,000,000; British pound inflows equal Â£2,000,000, while outflows equal Â£1,000,000. The spot rate of the krone is $0.15, and the spot rate of the pound is $1.50. Assume that the movements in the Danish krone and the British pound are highly correlated. Provide your assessment of your firm’s degree of transaction exposure (that is, whether the exposure is high or low). Substantiate your answer.
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