Assume a U.S. MNC initiates direct foreign investment in the United Kingdom. If the British pound is expected to appreciate against the dollar, the dollar value of earnings remitted to the parent should ____. The parent may request that the subsidiary ____ in order to benefit from the expectation about the pound.
A) increase; postpone remitting earnings until the pound strengthens
B) decrease; postpone remitting earnings until the pound strengthens
C) decrease; remit earnings immediately before the pound strengthens
D) increase; remit earnings immediately before the pound strengthens

Question

​Assume a U.S. MNC initiates direct foreign investment in the United Kingdom. If the British pound is expected to appreciate against the dollar, the dollar value of earnings remitted to the parent should ____. The parent may request that the subsidiary ____ in order to benefit from the expectation about the pound.
A) ​increase; postpone remitting earnings until the pound strengthens
B) ​decrease; postpone remitting earnings until the pound strengthens
C) ​decrease; remit earnings immediately before the pound strengthens
D) ​increase; remit earnings immediately before the pound strengthens

Quizplus · Accepted Answer

If the British pound is expected to appreciate against the dollar, the dollar value of earnings remitted to the parent should increase, as each pound converted into dollars will yield more dollars. Therefore, it would be beneficial for the parent to request that the subsidiary postpone remitting earnings until the pound strengthens, to maximize the dollar value received.

​Assume a U

Assume a U