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

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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.