Exchange rate fluctuations do not increase the riskiness of foreign portfolio investments because changes in exchange rates are compensated for by changes in interest rates and investment returns.

Question

Quizplus · Accepted Answer

Exchange rate fluctuations can increase the riskiness of foreign portfolio investments because they can cause losses or gains in value when converting currencies. While changes in interest rates and investment returns may provide some offsetting effects, they do not fully eliminate the risk posed by exchange rate fluctuations.

Exchange Rate Fluctuations Do Not Increase the Riskiness of Foreign