Give a qualitative example of each of the following: How fluctuating exchange rates can be beneficial...

Give a qualitative example of each of the following:

How fluctuating exchange rates can be beneficial to MNCs and how they can affect multinational corporations negatively.

Expert Solution

fluctuating exchange rate can be beneficial to multinational companies because they are exposed to various different countries

Beneficial exchange rate example-

If Indian company Infosys is exposed into having a receivable in American dollar of $600 in India as it has done service export, after 3 months, so currently it has $600 receivable after 3 months and after 3 months if the American dollar has appreciated 5% in respect to the Indian currency, the overall receivable of Infosys will increased by 5% and it would be equivalent to $630 (600*105%) in Indian rupees. Hence, it had overall lead to appreciation of The receivable due to increase of the exchange rate.

Negative exchange rate example-

Suppose in the above given example that dollar had depreciated by 5% in respect to the Indian rupees then the overall receivables after conversion into Indian rupees would be equivalent to $ 600*(100-.05)=$ 570

jeff jeffy answered 2 years ago

How fluctuating exchange rates can be beneficial to MNCs and how they can affect MNCs negatively....

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