What is "asset exposure" to foreign exchange risk?
A)the possibility that an asset denominated in U.S.dollars will decline in value because of changes in the foreign exchange rate
B)the possibility that an asset denominated in a foreign currency will change in value because of a change in the foreign exchange rate
C)the loss resulting from an import purchase when a foreign currency appreciates
D)the loss resulting from an import purchase when a foreign currency depreciates

Question

Quizplus · Accepted Answer

Asset exposure to foreign exchange risk refers to the possibility that the value of an asset denominated in a foreign currency will change due to fluctuations in the exchange rate between the foreign currency and the investor's home currency. Therefore, option B is the correct answer. Option A refers to the risk of a U.S. dollar denominated asset declining in value due to changes in the exchange rate, which is not related to foreign exchange risk. Options C and D refer to the impact of exchange rate fluctuations on import purchases, which is not directly related to asset exposure.

What Is "Asset Exposure" to Foreign Exchange Risk