What is "asset exposure" to foreign exchange risk?
A) The possibility that an asset denominated in domestic currency will decline in value because of changes in the foreign exchange rate
B) The possibility that an asset denominated in a foreign currency will change in value because of a change in the foreign exchange rate
C) The loss resulting from an import purchase when a foreign currency appreciates
D) The loss resulting from an import purchase when a foreign currency depreciates

Question

Quizplus · Accepted Answer

Asset exposure to foreign exchange risk refers to the potential impact of changes in foreign exchange rates on the value of an asset. This could occur when the asset is denominated in a foreign currency and its value changes due to variations in the exchange rate. Option A refers to potential losses of a domestic currency denominated asset due to changes in the exchange rate, which is not asset exposure. Option C and D refer to losses resulting from import purchases, which are not a part of asset exposure.

What Is "Asset Exposure" to Foreign Exchange Risk