If the parent firm and all subsidiaries denominate all exposed assets and liabilities in the parent's reporting currency this will ________ exposure but each subsidiary would have ________ exposure.
A) maximize translation; no transaction
B) eliminate translation; transaction
C) maximize transaction; no translation
D) eliminate transaction; translation

Question

Quizplus · Accepted Answer

Denominating all exposed assets and liabilities in the parent's reporting currency would eliminate translation exposure as there would be no need to convert currencies. However, each subsidiary would still have transaction exposure as they would be dealing with different currencies in their respective operations.

If the Parent Firm and All Subsidiaries Denominate All Exposed