Chapter 08 - Management of Transaction ExposureChapter 08Management of Transaction ExposureMultiple Choice Questions1. Transaction exposure is defined as: A. the sensitivity of realized domestic currency values of the firm's contractual cash flows denominated in foreign currencies to unexpected exchange rate changesB. the extent to which the value of the firm would be affected by unanticipated changes in exchange rateC. the potential that the firm's consolidated financial statement can be affected by changes in exchange ratesD. ex post and ex ante currency exposures2. The most direct and popular way of hedging transaction exposure is by: 3. If you have a long position in a foreign currency, you can hedge with: 4. If you owe a foreign currency denominated debt, you can hedge with: 8-1
Chapter 08 - Management of Transaction Exposure5. If you own a foreign currency denominated bond, you can hedge with: A. A long position in a currency forward contractB. A long position in an exchange-traded futures optionC. Buying the foreign currency today and investing it in the foreign county.D. A swap contract where pay the cash flows of the bond in exchange for dollars.6. The sensitivity of "realized" domestic currency values of the firm's contractual cash flows denominatedin foreign currency to unexpected changes in the exchange rate is: 7. The sensitivity of the firm's consolidated financial statements to unexpected changes in the exchange rate is: 8. The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is:
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- Spring '11
- Exchange Rate, United States dollar, Forward contract, Management of Transaction Exposure