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Details Title: Multinational Finance Description: Test 2 Vocab. Total Flash Cards: 17 Created: 03/21/2007 12:27:28	To study from this set of flash cards, or to create your own your own study flash cards, register HERE. If you are already a registered user, CLICK HERE.
Cards Term Basic types of exposure Definition 1. transaction 2. translation 3. operating Term Transaction exposure Definition __________ exposure results from transactions that are known, contractually binding future foreign currency denominated cash inflows and outflows Term operating Definition Even purely domestic firms have ________ exposure. Term transaction; operating Definition Both ____________ exposure and ________ exposure are cash-flow exposures that combined equal the company's transaction exposure Term unexpected currency fluctuations Definition Hedging only protects the firm from ______ Term selective Definition _____________ hedging involves hedging to protect against anticipated currency movements Term exposure netting Definition __________ involves offsetting exposures in one currency with exposures in the same or another currency that is highly correlated Term centralized currency exposure Definition ability to take advantage of exposure netting is one of the benefits of __________ management Term speculating Definition attempting to profit from foreign exchange forecasting is ________ rather than hedging Term hedging Definition _________ is not a long-term solution to permanent changes in exchange rates Term opportunity cost Definition real cost of hedging with a forward contract is a(n) _______________ Term forward contract Definition the difference between the forward rate and the actual future spot rate Term money-market hedge Definition involves simultaneous borrowing/lending activities to lock in the dollar value of a future foreign currency cash flow Term hedging a receivable Definition borrow in the foreign currency Term hedging a payable Definition deposit/lend/invest in the foreign currency Term homemade forward contract Definition a money-market hedge effectively create a __________ Term forward rate NOT the spot rate Definition pricing decisions should be made using the _______ rate