The following describes a long-run exposure of exchange rate risk. Your firm buys plumbing products in Asia and sells them in Canada at a substantial discount to plumbing products manufactured in Canada. However, the strengthening economies in Asia (projected to continue into the next decade) have increased Asian demand for their own plumbing products, pushing up local prices and damaging your ability to undercut your Canadian competitors.

Question

Quizplus · Accepted Answer

This scenario describes long-run exposure to exchange rate risk because it involves changes in competitive pricing and cost structures due to long-term shifts in exchange rates and economic conditions, affecting the firm's strategic position and profitability over an extended period.

The Following Describes a Long-Run Exposure of Exchange Rate Risk