14-49 If Foreign Currency Exchange Rates Are Highly Positively Correlated,how

question 66

Multiple Choice

14-49 If foreign currency exchange rates are highly positively correlated,how can a FI reduce its exchange rate risk exposure?

• A)By taking net long positions in all currencies.
• B)By taking net short positions in all currencies.
• C)By taking opposing net short and net long positions in different currencies.
• D)By maximizing net FX exposure in each currency,independently.
• E)By minimizing net FX exposure in each currency,independently.

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Definitions:

Consumer Spending

The total amount of money spent by households in an economy on goods and services, influencing economic growth and business cycle phases.

Higher-than-average Betas

This term refers to stocks or securities that exhibit volatility greater than the market average, indicating higher risk and potentially higher returns.

Higher-than-average Returns

Profits or yields that exceed the norm or average for a particular investment or sector.

Beta

A measure of the volatility or risk of a security or a portfolio in comparison to the market as a whole.