As the exchange risk and the within country risk are usually relatively independent:
A) an investor in the U.S. faces a higher exchange risk than the sum of exchange risk and within country risk.
B) an investor in the U.S. faces the same exchange risk as the sum of exchange risk and within country risk.
C) a U.S. investor's exchange risk is unaffected by any change in the sum of exchange risk and within country risk.
D) an investor in the U.S. faces a lower total risk than the sum of exchange risk and within country risk.

Question

Quizplus · Accepted Answer

Since exchange risk and within-country risk are relatively independent, diversifying investments across countries can lower the total risk faced by an investor, making it less than the simple sum of the two types of risks.

As the Exchange Risk and the Within Country Risk Are