​A Firm Without Any Exposure to Foreign Exchange Rates Would

question 3

Multiple Choice

​A firm without any exposure to foreign exchange rates would likely increase this exposure the most by:

• A) ​borrowing domestically.
• B) ​borrowing a portfolio of foreign currencies that are not highly correlated.
• C) ​borrowing a portfolio of foreign currencies that are highly correlated.
• D) ​borrowing two foreign currencies that are negatively correlated.

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Definitions:

Underground Economy

Economic activities that occur outside of official regulation or taxation systems, often including undocumented labor and illegal trade.

National Income Accounting

A system of accounts that countries use to measure the overall economic activity and the total income of their citizens.

Natural Resources

Raw materials and resources provided by nature without human intervention, crucial for economic production, such as minerals, forests, and water.

Base Year

The year with which other years are compared when constructing an index; the index equals 100 in the base year.