Short-run exposure to exchange rate risk is best illustrated by which one of the following?   Multiple Choice   Change in book value when the market value of an asset remains constant   Daily fluctuations in the spot rate   Increases in the forward rate as the time to settlement increases   Changes in relative economic conditions between two countries   Unrealized foreign exchange gains

Q: Question: 1 . Which of the following is not correct?   Choices: Premium arises when the spot…

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Q: Relative inflation rates affect interest rates, exchange rates, the overall economic health of a…

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Q: A U.S. exporting firm may use foreign exchange futures to hedge its exposure to exchange rate risk.…

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Q: Given endogenous output, solve for the rational-expectations consistent speed of adjustment (of…

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Q: There are three main types of methods to forecast exchange rates: technical forecasting fundamental…

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Q: Inflation rates and interest rates: O shift both demand and supply for a foreign currency at the…

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Q: d. Forward contracts are not traded in any exchanges across the world.

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Q: Exchange rates fluctuate under both the fixed exchange rate and floatingexchange rate systems. What,…

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Q: Purchasing Power Parity (PPP) theory states that none of the options. O None of the options. O the…

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Q: Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar…

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Q: Economic exposure represents the impact of exchange rate fluctuations on a firm’s future cash flows

A: The answer along with the explanation is provided below:

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Q: Excess funds can be used for domestic or foreign short-term investments. In some instances…

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Q: Which of the following refers to exposure netting?  1. It is a strategy based on adjustments of the…

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Q: Which of the following is correct when exports exceed imports in international trade? Multiple…

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Q: Relative inflation rates affect interest rates, exchange rates, the overall economic health of a…

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Q: Foreign exchange risk

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A: The above statement is true.

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.