Suppose Your Firm Invests $100,000 in a Project in Italy

question 30

Multiple Choice

Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is $1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has expropriated your firm's assets paying only €80,000 in compensation. This is an example of

• A)exchange rate risk.
• B)political risk.
• C)market imperfections.
• D)none of the above, since $100,000 = €80,000 × $1.25/€1.00

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Definitions:

Bending Forward

A physical movement where the upper body moves closer to the legs, often used in exercises or as a stretch.

Shrugging Shoulders

A movement involving elevation of the shoulders, often as a gesture of indifference or to activate specific muscles in the upper body.

Biaxial Joint

A type of synovial joint that allows movement around two axes, providing a greater range of motion, such as seen in the wrist or ankle.

Articular Cartilage

A smooth, white tissue that covers the ends of bones where they come together to form joints.