Exchange-Rate Risk

question 35

Multiple Choice

Exchange-rate risk

• A) results from changes in the exchange rates between the currency of the investor and the country in which the investment is made.
• B) can be hedged by using a forward or futures contract in foreign exchange.
• C) cannot be eliminated.
• D) results from changes in the exchange rates between the currency of the investor and the country in which the investment is made and cannot be eliminated.
• E) results from changes in the exchange rates between the currency of the investor and the country in which the investment is made and can be hedged by using a forward or futures contract in foreign exchange.

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Definitions:

Doughnuts

A type of fried dough confectionery or dessert food, typically ring-shaped, sweet, and sometimes filled.

Coffee

A beverage made from roasted and ground seeds of the Coffea plant, consumed worldwide for its stimulating effects.

Optimal Consumption Rule

A principle in economics that determines the best combination of goods and services that maximizes the utility of a consumer given their budget constraints.

Marginal Utility

The additional satisfaction or benefit gained from consuming one more unit of a good or service.