Which One of These Is a Suggested Means of Reducing

question 56

Multiple Choice

Which one of these is a suggested means of reducing short-run exposure to exchange rate risk?

• A)Compiling financial statements only in foreign currency terms
• B)Utilizing foreign borrowing to fund foreign operations
• C)Borrowing domestic currency,exchanging it for foreign currency,and investing it in foreign investments
• D)Ensuring any foreign operation requires significant parent company involvement
• E)Using a current spot contract to exchange the amount of funds needed

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Definitions:

Bilateral Contract

An agreement between two parties in which each party commits to performing a specific obligation.

Consideration

In a contractual agreement, it is the value or promise that each party agrees to exchange.

Promissory Estoppel

A legal principle that enables a party to recover on a promise made when they have reasonably relied on that promise to their detriment, even if a formal contract does not exist.

Illusory Contract

An agreement that fails to bind at least one of the parties due to the lack of a definite promise or because the terms allow for withdrawal without consequence.