Monetary cash flows that are exposed to currency risk are affected primarily by ______.
A) changes in domestic unemployment
B) changes in foreign unemployment
C) changes in nominal exchange rates
D) changes in real exchange rates
E) None of the above

Question

Quizplus · Accepted Answer

Monetary cash flows that are exposed to currency risk are primarily affected by changes in nominal exchange rates. Currency risk arises when a company's cash flows are denominated in a foreign currency. Fluctuations in the exchange rate between the domestic currency of the company and the foreign currency can impact the value of these cash flows. Real exchange rates, domestic and foreign unemployment rates do not directly impact currency risk.

Monetary Cash Flows That Are Exposed to Currency Risk Are