Which of the Following Statements Is Incorrect

question 34

Multiple Choice

Which of the following statements is incorrect?

• A) Transaction exposure represents only the exchange rate risk when converting net foreign cash inflows to U.S. dollars or when purchasing foreign currencies to send payments.
• B) Economic exposure represents any impact of exchange rate fluctuations on a firm's future cash flows.
• C) Firms can simply focus on hedging their foreign currency payables and/or receivables to hedge economic exposure.
• D) The management of economic exposure tends to serve as a long-term solution rather than just a short-term solution.

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Definitions:

Price Elasticity

A metric evaluating the sensitivity of the amount of a good purchased to price fluctuations.

Demand Curve

A graph showing the relationship between the price of a product and the quantity of the product that consumers are willing to purchase.

Price Elasticity

A measure reflecting how demand for a particular good shifts with adjustments in its pricing.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers at those prices, typically downward sloping.