A U.S. MNC has the equivalent of $1 million cash outflows in each of two highly negatively correlated currencies. During ____ dollar cycles, cash outflows are ____.
A) weak; somewhat stable
B) weak; favorably affected
C) weak; adversely affected
D) none of the above

Question

Quizplus · Accepted Answer

During weak dollar cycles, the value of the U.S. dollar decreases relative to other currencies. If the MNC has cash outflows in two highly negatively correlated currencies, the impact of the weak dollar on one currency might be offset by the opposite movement in the other currency, leading to somewhat stable cash outflows overall.

A US MNC Has the Equivalent of $1 Million Cash Outflows