Transaction Exposure and Operating Exposure Exist Because of Unexpected Changes

question 22

Multiple Choice

Transaction exposure and operating exposure exist because of unexpected changes in future cash flows. The difference between the two is that ________ exposure deals with cash flows already contracted for, while ________ exposure deals with future cash flows that might change because of changes in exchange rates.

• A) transaction; operating
• B) operating; transaction
• C) operating; accounting
• D) none of the above

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Definitions:

Reducing

The process of decreasing or minimizing a quantity, dimension, or frequency.

Type I Error

The incorrect rejection of a true null hypothesis, also known as a "false positive."

Type II Error

The error that occurs when a statistical test fails to reject a false null hypothesis (a "false negative").

Innocent Person

An individual who has not committed the crime or offense they are being accused of.