Which term refers to the potential for change in expected cash flows that arises from the pricing of products and the location of investments?
A) translation exposure
B) transaction exposure
C) economic exposure
D) hedge exposure

Question

Quizplus · Accepted Answer

Economic exposure refers to the potential for change in expected cash flows that arises from changes in exchange rates, pricing of products, and location of investments. Translation exposure refers to the risk of gains or losses due to changes in exchange rates when financial statements are translated into a different currency. Transaction exposure refers to the risk of losses due to changes in exchange rates when a firm engages in international transactions. Hedge exposure refers to the use of financial instruments to minimize the risk of potential losses from exchange rate movements.

Which Term Refers to the Potential for Change in Expected