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1. Dual currency. In the early 1990s the UK government suggested that what is now called the euro could be used alongside local currencies. How would such a currency arrangement affect MNCs?
2. Using regression analysis to measure exposure.
a How can a UK company use regression analysis to assess its economic exposure to fluctuations in the euro?
b In using regression analysis to assess the sensitivity of cash flows to exchange rate movements, what is the purpose of breaking the database into sub-periods?
c Assume the regression coefficient based on assessing economic exposure was much higher in the second sub-period than in the first subperiod. What does this tell you about the firm’s degree of economic exposure over time? Why might such results occur?