Exposure from the uncertain currency value of a foreign-denominated transaction to be completed at some future date describes:
A) Information exposure
B) Translation exposure
C) Transaction exposure
D) Economic exposure

Question

Quizplus · Accepted Answer

Transaction exposure involves the risk of loss due to a change in exchange rates between the time of the transaction and the time of settlement. This is often associated with foreign-denominated transactions that are to be completed at a future date. Information exposure refers to the risk associated with lack of information or inadequate knowledge of the foreign market. Translation exposure is the risk of impact on the balance sheet and income statement due to fluctuating exchange rates, and economic exposure involves the overall impact on the firm's cash flows and value due to changes in exchange rates.

Exposure from the Uncertain Currency Value of a Foreign-Denominated Transaction