What Is "Asset Exposure" to Foreign Exchange Risk

question 36

Multiple Choice

What is "asset exposure" to foreign exchange risk?

• A)the possibility that an asset denominated in U.S.dollars will decline in value because of changes in the foreign exchange rate
• B)the possibility that an asset denominated in a foreign currency will change in value because of a change in the foreign exchange rate
• C)the loss resulting from an import purchase when a foreign currency appreciates
• D)the loss resulting from an import purchase when a foreign currency depreciates

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Definitions:

PE Ratio

A valuation metric for stocks, calculated by dividing the current market price of a stock by its earnings per share.

Earnings Per Share

A financial metric that divides a company's profit by the outstanding shares of its common stock.

Convertible Preferred Stock

Equity securities that offer the owner the right to convert into a specified number of the company's common stock, often at a pre-determined time.

Common Stock

A type of equity security that represents ownership in a corporation, with rights to vote on corporate matters and receive dividends.