The Following Information Is to Be Used in Answering Questions

Multiple Choice

The following information is to be used in answering questions 36?38.
U.S. borrowing rate for 1 year = 9.5%
U.S. deposit rate for 1 year = 8.7%
French borrowing rate for 1 year = 11.3%
French deposit rate for 1 year = 10.2%
French franc spot quote = $0.1763?78
French franc 1?year forward quote = $0.1729?47
-1990, Goodyear had operations in both Germany and the Netherlands. In the past the Dutch guilder and Deutsche mark were highly correlated in their movements against the U.S. dollar. If the Dutch unit has net inflows of guilders and the German unit has net inflows of DM, then Goodyear's combined transaction exposure

A) approximately equals the sum of its guilder and DM exposures
B) is less than the sum of its guilder and DM exposures because the currencies are highly correlated
C) is less than the sum of its guilder and DM exposures because of diversification between the company's subsidiaries
D) is not significant due to the highly correlated nature of the two currencies