The sensitivity of "realized" domestic currency values of the firm's contractual cash flows denominated in foreign currency to unexpected changes in the exchange rate is
A)transaction exposure.
B)translation exposure.
C)economic exposure.
D)none of the above

Question

Quizplus · Accepted Answer

Transaction exposure refers to the sensitivity of the firm's contractual cash flows denominated in foreign currency to unexpected changes in the exchange rate as they are realized. Translation exposure relates to the impact of exchange rate fluctuations on the valuation of assets and liabilities denominated in foreign currency. Economic exposure refers to the impact of exchange rate fluctuations on the firm's overall value and competitiveness. Therefore, Option A is the correct answer.

The Sensitivity of "Realized" Domestic Currency Values of the Firm's