Operating Exposure

question 22

Multiple Choice

Operating exposure:

• A) measures the extent to which foreign exchange volatility may affect a firm's future ongoing revenues and costs.
• B) measures the effects of FX changes on the balance sheet of the firm.
• C) refers to the extent to which the value of the firm's cash flows may be affected by changes in the exchange rate.
• D) tries to measure the impact of unexpected exchange rate fluctuations on the net present value of the firm's future cash flows.

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Definitions:

Retirement Account

A financial arrangement designed to replace employment income upon retirement, often offering tax benefits to encourage saving for the retirement years.

Retire

The process of leaving one's job and ceasing to work, typically due to age or health reasons.

Interest Rate

The percentage of a sum of money charged for its use, reflecting the cost of borrowing money or the return on invested funds.

Bond

A fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period at a variable or fixed interest rate.