Which of the statements a) through c) regarding the currency risk exposure of large multinational corporations is FALSE?
A) Multinational corporations are likely to be exposed to currency risk.
B) Investors will prefer that managers hedge currency risk if the firm's expected future cash flows can be increased through hedging.
C) Managers have little need to hedge exposures to currency risks that are diversifiable from the shareholders' perspective.
D) Two of the above are false.
E) Each of the statements is true.

Question

Quizplus · Accepted Answer

This statement is false. Managers should hedge exposures to currency risks even if they are diversifiable from the shareholders' perspective, as hedging can reduce volatility and lead to a more stable cash flow for the company.

Which of the Statements A) Through C) Regarding the Currency