Question: A large MNC, has commissioned you to assess its transaction exposure. Its projected cash flows are as follows for the next year:
|
Currency
|
Total Inflow
|
Total Outflow
|
Current Exchange Rate in U.S. Dollars
|
|
Singapore dollar (SGP)
|
SGP50,000,000
|
SGP40,000,000
|
$.75
|
|
British pound (£)
|
£3,000,000
|
£2,000,000
|
$1.50
|
Assume that the movements in the Singapore dollar and the pound are highly correlated. Provide your assessment as to your firm's degree of transaction exposure (as to whether the exposure is high or low). Substantiate your answer.