Question : What is the term used to describe the risk that arises from changes in government regulations or policies affecting foreign exchange rates?
Option 1: Political risk
Option 2: Credit risk
Option 3: Market risk
Option 4: Interest rate risk
Correct Answer: Political risk
Solution : The correct answer is a) Political risk
Political risk refers to the uncertainty and potential negative impact on investments or business operations due to political actions, such as changes in government policies, regulations, or political instability. These actions can include imposing capital controls, implementing trade barriers, or altering exchange rate policies, which can directly affect foreign exchange rates and potentially disrupt international trade and investment flows.
Question : What is the term used to describe the risk that changes in exchange rates will negatively impact the value of investments denominated in foreign currencies?
Option 1: Currency risk
Option 2: Interest rate risk
Option 4: Credit risk
Question : What is the term used to describe the risk that changes in interest rates will impact the value of fixed-income investments denominated in foreign currencies?
Option 1: Interest rate risk
Option 4: Liquidity risk
Question : What is the term used to describe the risk that changes in exchange rates will impact the ability of a borrower to repay a foreign currency-denominated debt?
Option 1: Credit risk
Option 3: Sovereign risk
Option 4: Currency risk
Question : What is the term used to describe the risk that changes in exchange rates will impact the profitability of a company's international trade transactions?
Option 1: Operational risk
Option 4: foreign exchange risk
Question : What is the term used to describe the risk that changes in exchange rates will affect the value of an investment portfolio containing assets denominated in different currencies?
Option 3: Liquidity risk
Option 4: Market risk
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