Which One of the Following Is the Risk That a Firm

question 5

Multiple Choice

Which one of the following is the risk that a firm faces when it opens a facility in a foreign country,given that the exchange rate between the firm's home country and this foreign country fluctuates over time?

• A)international risk
• B)diversifiable risk
• C)purchasing power risk
• D)exchange rate risk
• E)political risk

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Definitions:

Market Risk Premium

The extra profit an investor is aiming for by choosing to invest in a market portfolio that carries risk instead of opting for assets devoid of any risk.

Government Bond

A type of investment where an investor loans money to a government in exchange for periodic interest payments plus the return of the bond's face value at maturity.

Treasury Bill

A Treasury Bill (T-Bill) is a short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less.