08 - 08 Student: _ 1. Transaction exposure is defined as: A...

08
Student: ___________________________________________________________________________
1. 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 changes
B. the extent to which the value of the firm would be affected by unanticipated changes in exchange rate
C. the potential that the firm's consolidated financial statement can be affected by changes in exchange
rates
D. ex post and ex ante currency exposures
2. 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: 5. If you own a foreign currency denominated bond, you can hedge with:
A. A long position in a currency forward contract
B. A long position in an exchange-traded futures option
C. 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 denominated in
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:

9. With any hedge
A. Your losses on one side should about equal your gains on the other side.
B. You should try to make money on both sides of the transaction: that way you make money coming and
going.
C. You should spend at least as much time working the hedge as working the underlying deal itself.
D. You should agree to anything your banker puts in front of your face.