Forecasting Exchange Rates of Currencles in Developing Countries Some U.S.-based MNCs have business in developing countries and have difficulty hedging their exposure to exchange rate risk. Their forecasts of future exchange rates are subject to much error because the currencies in these countries tend to be very volatile and could possibly depreciate by 20 percent or more in a given year. Write a short essay on how MNCs that have receivables in such currencies might be able to use exchange rate forecasts to prepare for possible weak currency scenarios, so that they can assess whether they will have sufficient dollar cash inflows to cover their debt payments.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 9, Problem 1CT
Textbook Problem

Forecasting Exchange Rates of Currencles in Developing Countries Some U.S.-based MNCs have business in developing countries and have difficulty hedging their exposure to exchange rate risk. Their forecasts of future exchange rates are subject to much error because the currencies in these countries tend to be very volatile and could possibly depreciate by 20 percent or more in a given year. Write a short essay on how MNCs that have receivables in such currencies might be able to use exchange rate forecasts to prepare for possible weak currency scenarios, so that they can assess whether they will have sufficient dollar cash inflows to cover their debt payments.

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