Question

ppreciation of the euro relative to the U.S. dollar will cause a U.S.-based MNC's reported earnings (from the consolidated income statement) to ____. If a firm desired to reduce the exposure of its consolidated earnings to exchange rate movements, it could stabilize its reported earnings by ____ euros forward in the foreign exchange market.

Answer 1

Answer:

Decrease or fall, Purchasing

Explanation:

Appreciation is the term which is defined as the increase in the currency value relative to the another currency, which could be exchanged for a huge amount of foreign currency.

So, when there is appreciation in euro in relation to US dollar, it cause US grounded MNC reported earnings to decrease as the US dollar will not be exchanged because euro is appreciated.

And when the firm desire to reduce the exposure to the exchange rate movements, it might stabilize the reported earnings through purchasing the euros in the foreign exchange market.