Exchange rate risk is a. The risk associated with the use of debt financing by companies b. The risk of doing business in a particular industry or environment c. The risk of loss due to imports and exports dominated in other currencies d. The uncertainty about the time element, the price concession, and the conversion to cash. ************************** correct answer please.
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- Liquidity risk is a. The risk of doing business in a particular industry or environment b. The uncertainty about the time element, the price concession , and the conversion to cash c. The risk if loss due to import and export dominated in other currencies d. The risk associated with the use of debt financing by companies. **************************** correct answer please&***************Transaction exposure: A. measures the extent to which foreign exchange volatility may affect a firm's future ongoing revenues and costs. B. measures the effects of FX changes on the balance sheet of the firm. C. refers to the extent to which the value of the firm's cash flows may be affected by changes in the exchange rate. D. tries to measure the impact of unexpected exchange rate fluctuations on the net present value of the firm's future cash flows.Define each following terms: p. American depository receipts (ADRs); repatriation of earnings q. Country risk; exchange rate risk; political risk; business climate
- 1. A type of risk that relates to the changes in the market value of commodities that diminishes the power of money in relation to its ability to purchase goods and services. A. Default risk B. Interest-rate risk C. Purchasing power risk D. Liquidity risk 2. Bonds, a source of long-term financing, are long-term debt instruments. They are similar to term loans, except that they ae usually offered to the public and sold to many investors. Among the advantages (to the issuer) of issuing bonds are as follows, except A. Cost of debt is limited- bondholders usually do not participate in the superior earning of the firm. B. Interest paid on debt (bonds) is tax deductible C. Debt adds risk to a firm D. Basic control of the firm is not shared with the debt holders. 3. Cost of capital is the: A. amount the company must pay for its plant assets. B. dividends a company must pay on its equity securities. C. cost the company must incur to obtain…Statement I - Exchange rate risk is a factor that contributes to the difficulty of the company to manage its international creditStatement II - A relaxation in collection policy that lengthens the firm collection period ultimately lengthens the firms operating cycle and cash conversion cycle a. False; False b. True; False c. True; True d. False; TrueAn example of transaction exposure is when Question 4 options: companies have obligations for the purchase of goods at previously agreed prices. companies borrow funds in domestic currency. there is an impact of currency exchange rate changes on the reported financial statements of a company. there is a long-term effect of changes in exchange rates. changing exchange rates persists on future prices, sales, and costs
- A key issue facing financial executives of multinational firms is exposure to exchange rate changes.a. Define exposure, differentiating between accounting and economic exposure. What role does inflation play?b. Describe at least three circumstances under which economic exposure is likely to exist? c. Of what relevance are the international Fisher effect and purchasing power parity to your answers to parts a and b? d. What is exchange risk, as distinct from exposureA foreign currency loan is a typical example for O a. Currency Risk O b. Interest rate risk O c. Translation Exposure O d. Transaction ExposureWrite Notes on the Following A: Off Balance Sheet Assets and Liabilities B: Interest Rate Risk Management C: Sterilized Intervention in Foreign Exchange D: Unsterilized Intervention in Foreign Exchange E: Balance of Payment
- i)discuss accounting issues in risk management, and explain the following terms: fair value hedge, cash flow hedge, foreign investment hedge, speculation ii)discuss some of the famous cases in which the lack of proper risk management policies and procedures have caused companies to incur large losses. iii)explain some general guidelines that senior management should follow to set up and maintain an effective risk management system. iv)explain how a currency swap can be used to hedge a stream of foreign cash flows. v)define interest rate derivatives, and compare and contrast them against bond derivatives.Which foreign exchange risk relates to the value of assets held in foreign currency on the statement of financial position of financial institutions which trades? a. Economic risk b. Transaction type risk c. Currency risk d. Translation riskThe deterioration of economic conditions; deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks; market crisis are examples of what kinds of risk? Select one: a. Solvency risk b. Foreign exchange risk c. Sovereign risk d. Credit risk