Question : What is the term used to describe the risk that changes in exchange rates will affect the value of future cash flows associated with an investment or business operation?
Option 1: Currency risk
Option 2: Liquidity risk
Option 3: Market risk
Option 4: Systemic risk
Correct Answer: Currency risk
Solution : The correct answer is a) Currency risk
Currency risk refers to the potential for fluctuations in exchange rates to impact the profitability or value of investments, trade transactions, or financial obligations denominated in foreign currencies. It arises from the uncertainty and volatility in exchange rates and can have significant implications for businesses and investors engaged in international activities.
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 2: Credit risk
Option 3: Liquidity risk
Option 4: Market risk
Question : What is the term used to describe the risk that changes in exchange rates will affect the value of a company's foreign investments and operations?
Option 1: Translation risk
Option 2: Systemic risk
Option 3: Country risk
Question : What is the term used to describe the risk that changes in exchange rates will impact the profitability of international trade transactions?
Option 2: Counterparty risk
Option 4: Operational risk
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 2: Interest rate risk
Option 4: Credit 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
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