The Major Source of Risk Exposure Resulting from Issuance of Standby

question 89

Multiple Choice

The major source of risk exposure resulting from issuance of standby letters of credit is

• A)technology risk.
• B)interest rate risk.
• C)credit risk.
• D)foreign exchange risk.
• E)off-balance-sheet risk.

Comprehend the functions and utilities of American Depository Receipts (ADRs) and World Equity Benchmark Shares (WEBS) in global investing.

Understand how U.S. investors can participate in foreign markets through derivatives and direct investments.

Calculate the expected return on international investments considering foreign exchange rates and yields.

Identify the risks involved in international investing, including foreign exchange risk.

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Definitions:

Yearly Return

The percentage of increase or decrease in the value of an investment over a one-year period.

Maximize

To increase to the greatest possible amount or degree.

Minimize

To reduce something to the smallest possible level or amount.

Profits

The financial gains obtained when revenues exceed the costs and expenses incurred to operate the business.