The Type of Risk Primarily Concerned with Converting Revenues and Costs

question 16

Multiple Choice

The type of risk primarily concerned with converting revenues and costs denominated in foreign currencies into a firm's domestic currency is

• A) economic exposure.
• B) transaction exposure.
• C) translation exposure.
• D) none of the above.

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Definitions:

Arbitrage Opportunities

Situations where a security or asset is simultaneously priced differently in two or more markets, allowing for risk-free profit through simultaneous buying and selling.

Spot Exchange Rate

The existing rate for the instant exchange of one currency for another.

Correlation

A numerical indicator that demonstrates how two variables move in relation to each other, showing both the intensity and the orientation of their link.

Indices

Market indicators or benchmarks that track the performance of a specific basket of assets or group of stocks, representing a specific sector, market, or economy.