Asked by Meghan Maratea on Jul 29, 2024
Verified
The possibility of experiencing a drop in revenue or an increase in cost in an international transaction due to a change in foreign exchange rates is called
A) foreign exchange risk.
B) political risk.
C) translation exposure.
D) hedging risk.
Foreign Exchange Risk
The possibility of incurring losses due to changes in currency exchange rates.
Translation Exposure
The potential for a company's financial statements to be affected by changes in exchange rates when foreign operations are translated into the parent company's currency.
- Identify the risks involved in international investing, including foreign exchange risk.
Verified Answer
AT
Angel ToussaintAug 01, 2024
Final Answer :
A
Explanation :
The possibility of experiencing a drop in revenue or an increase in cost in an international transaction due to a change in foreign exchange rates is known as foreign exchange risk. This risk arises due to the variability of the exchange rates between the time a transaction is initiated and settled.
Learning Objectives
- Identify the risks involved in international investing, including foreign exchange risk.
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