Exchange Rate Risk Is the Risk That the Cash Flows

question 28

True/False

Exchange rate risk is the risk that the cash flows from a foreign project will be worth less than those same cash flows denominated in the parent company's home currency.

---

Definitions:

Mortgage-Related

Pertains to financial instruments or activities that involve the financing of real estate transactions through loans secured by a mortgage.

Federal National Mortgage Association

A government-sponsored enterprise (GSE) known as Fannie Mae; it expands the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities.

U.S. Treasury

Refers to the federal government department responsible for managing government revenue and also to the securities (like bonds) it issues, considered low-risk investments.

Put Option

A financial contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price within a specified time.