Which of the following are true statements?
A)Since translation exposure does not have an immediate direct effect on operating cash flows,its control is relatively unimportant in comparison to transaction exposure,which involves potential real cash flow losses.
B)Since it is generally not possible to eliminate both translation exposure and transaction exposure,it is more logical to effectively manage transaction exposure.
C)Two ways to control translation risk are: a balance sheet hedge and a derivatives hedge.
D)all of the options

Question

Quizplus · Accepted Answer

All the statements are true regarding translation and transaction exposures in international finance. Translation exposure, while not directly affecting cash flows, is considered less critical than transaction exposure, which can lead to real cash flow losses. However, managing transaction exposure is prioritized due to its direct impact on cash flows. Both balance sheet and derivatives hedges are common methods for controlling translation risk.

Which of the Following Are True Statements