alleryStart learning →A shift in exchange rates that changes demand for a good sold abroad is an example of
Aeconomic risk
Btranslation risk
Ccontingent risk
Dcredit risk
Answer & Solution
Correct answer: A. economic risk
A rate shift that influences demand for a good in a foreign country affects future cash flows, which is economic risk.
Keep practising Foreign Exchange Exposure and Risk Management
Browse all Foreign Exchange Exposure and Risk Management questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
European banks may use their own VaR models to setUnder the Bretton Woods system, many businessesEconomic risk of foreign investment includes exchange rates, regulation andFutures cannot fully mitigate currency risk as they exist only forForward and futures contracts are similar in that bothThe Garman-Kohlhagen formula needs two interest rates becauseThe value of a European FX option is typically computed assuming the exchange rate followsThe Garman-Kohlhagen FX option model extends