What Kind of Exposure Exists for Foreign Currency Firm Commitments

question 28

Multiple Choice

What kind of exposure exists for foreign currency firm commitments?

• A)fair value exposure
• B)cash flow exposure
• C)both fair value exposure and cash flow exposure
• D)neither fair value exposure nor cash flow exposure

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Definitions:

Debt Investments

Financial assets purchased with the expectation that the investment will generate interest income from the debtor and be repaid at a future date.

Stock Investments

Investments in the equity or stock of another company, intending to earn dividends or sell for profit.

Debt Investments

Financial assets representing money lent to an entity (corporate or governmental) that must be paid back with interest.

Historical Cost

The original monetary value of an asset, as recorded on the balance sheet, without adjustments for inflation or market changes.