What exposure exists when the present value of future cash flows change as a result of changes in exchange rates?
A) Translation (accounting) exposure
B) Transaction exposure
C) Economic exposure
D) Business risk exposure

Question

Quizplus · Accepted Answer

The exposure described is economic exposure. Economic exposure refers to the risk that a company's cash flows, either the present value or future value, will be affected by changes in exchange rates. This exposure is not related to specific transactions or accounting practices, making options A and B incorrect. Business risk exposure refers to risks related to a company's operations, unrelated to exchange rates.

What Exposure Exists When the Present Value of Future Cash