Currency Exposure Can Be Difficult to Estimate Because a Firm

question 17

Multiple Choice

Currency exposure can be difficult to estimate because a firm is likely to be involved in multiple transactions in a currency at different times.This complication can be made simpler by:

• A)eliminating the transactions at the extremes and focusing on the average transactions.
• B)considering only the transaction that occur within a very short period of time.
• C)considering only representative transactions.
• D)netting the transactions so that the focus can be on the net effect of the transactions.

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Definitions:

DAX

A blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange.

FTSE

The Financial Times Stock Exchange (FTSE) is a series of indices that represent the performance of stocks listed on the London Stock Exchange.

Hang Seng

A market index that represents the performance of the largest companies listed on the Hong Kong Stock Exchange.

Callable Bond

A type of bond that can be redeemed by the issuer before its maturity date, typically at a premium price.