Assume that an MNC has a subsidiary in Italy, which exports its products to various countries in Europe. Since all of the countries where it exports use Euro as their currency, this MNC is not subject to the exchange rate risk.

Question

Quizplus · Accepted Answer

Even though all the countries where the subsidiary exports use Euro, exchange rate risk can still occur due to fluctuations in exchange rates between Euro and other currencies such as US Dollars or Japanese Yen. If the MNC has to convert Euro back to its home currency, exchange rate fluctuations can lead to gains or losses.

Assume That an MNC Has a Subsidiary in Italy, Which