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:

Information-Processing Theory

A cognitive psychology theory that uses a computer metaphor to explain how human mind processes information, including stages of encoding, storage, and retrieval.

Cognitive Development

The process by which individuals acquire and evolve their abilities in thinking, reasoning, and understanding throughout their lives.

Occurs Daily

Events or actions that happen or are performed every single day.

Occurs in Stages

A phrase describing processes or developments that unfold in sequential phases over time, each stage building on the previous one.