The extent to which the value of the firm would be affected by 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

Economic exposure refers to the extent to which the value of a firm would be affected by unexpected changes in exchange rates. This exposure arises from the impact of exchange rate fluctuations on the firm's cash flows, market share, and competitiveness. Transaction exposure relates to the risk of losses from foreign currency transactions already entered into, while translation exposure refers to the effect of currency fluctuations on the financial statements of a company's foreign operations. Therefore, the correct answer is economic exposure.

The Extent to Which the Value of the Firm Would