When a Company with a Foreign Subsidiary Needs to Arrange

question 58

Multiple Choice

When a company with a foreign subsidiary needs to arrange funding in a foreign currency to pay its foreign employees,it faces:

• A) accounting exposure.
• B) economic exposure.
• C) operating exposure.
• D) translation exposure.

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Definitions:

Rational Person

An individual who systematically and logically evaluates options to make decisions that maximize their personal benefit or utility.

Present Value

The present worth of a sum of money or series of cash flows anticipated in the future, calculated using a certain rate of return.

Consumption Plan

An outline of how individuals or households intend to allocate their income towards consumption goods and services over a period.

Interest Rate

The cost of borrowing money or the reward for saving it, typically expressed as a percentage of the principal amount per year.