Final answer:
In this scenario, the U.S. MNC owns a foreign asset, and the foreign currency value of the asset is inversely related to changes in the dollar-foreign currency exchange rate.
The company has a built-in hedge as the value of the foreign asset moves in the opposite direction of the exchange rate.
Therefore, the correct answer is: option B) the company has a built-in hedge.
Step-by-step explanation:
Foreign Assets means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments.
In this case, when the dollar weakens, the value of the foreign asset in terms of dollars will increase, offsetting the negative impact of the exchange rate movement.
The U.S. MNC (Multinational Corporation) owns a foreign asset. This means that as the exchange rate between the dollar and the foreign currency changes, the value of the foreign asset in terms of dollars will change in the opposite direction.
A built-in hedge refers to the situation where the value of the foreign asset moves in the opposite direction of the exchange rate, providing a natural protection against exchange rate fluctuations.