Which of a) through c) is TRUE?

Question

Quizplus · Accepted Answer

All of the statements are true. Domestic nominal cash flows are exposed to purchasing power risk because inflation can erode their value. Foreign nominal cash flows are exposed to purchasing power risk because inflation in the foreign country can erode their value in the domestic currency. The real value of a future foreign currency cash flow in the domestic currency depends on domestic inflation because inflation will affect the exchange rate between the two currencies. Hedging foreign currency risk substitutes exposure to domestic purchasing power risk for exposure to currency risk because a hedge will lock in the exchange rate, but it will not protect against inflation in either country.

Which of A) Through C) Is TRUE