Asked by justin motley on Jul 09, 2024
Verified
Exchange-rate risk
A) results from changes in the exchange rates between the currency of the investor and the country in which the investment is made.
B) can be hedged by using a forward or futures contract in foreign exchange.
C) cannot be eliminated.
D) results from changes in the exchange rates between the currency of the investor and the country in which the investment is made and cannot be eliminated.
E) results from changes in the exchange rates between the currency of the investor and the country in which the investment is made and can be hedged by using a forward or futures contract in foreign exchange.
Exchange-Rate Risk
The potential for investors or companies to experience losses due to fluctuations in the exchange rates between currencies.
Forward Contract
An agreement calling for future delivery of an asset at an agreed-upon price.
Futures Contract
A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, often used for commodities, currencies, and financial instruments.
- Understand the core concepts of risk and return in worldwide investment collections, highlighting the diversification profits and impact of currency exchange rates.
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Learning Objectives
- Understand the core concepts of risk and return in worldwide investment collections, highlighting the diversification profits and impact of currency exchange rates.
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