Which one of the following is a suggested method of reducing a U.S. importer's short-run exposure to exchange rate risk?

The home currency approach:    A.  generally produces more reliable results than those found using the foreign currency approach. B.  requires an applicable exchange rate for every time period for which there is a cash flow. C.  uses the current risk-free nominal rate to discount all cash flows related to a project. D.  stresses the use of the real rate of return to compute the net present value (NPV) of a project. E.  converts a foreign denominated NPV into a dollar denominated NPV. Refer to section 21.5

45.

The foreign currency approach to capital budgeting analysis: I. is computationally easier to use than the home currency approach. II. produces the same results as the home currency approach. III. requires an exchange rate for each time period for which there is a cash flow. IV. computes the NPV of a project in both the foreign and the domestic currency.    A.  I and III only B.  II and IV only C.  I, II, and IV only D.  II, III, and IV only E.  I, II, III, and IV Refer to section 21.5

46.

Which one of the following is a suggested method of reducing a U.S. importer's short-run exposure to exchange rate risk?    A.  entering a forward exchange agreement timed to match the invoice date B.  investing U.S. dollars when an order is placed and using the investment proceeds to pay the invoice C.  exchanging funds on the spot market at the time an order is placed with a foreign supplier D.  exchanging funds on the spot market at the time an order is received E.  exchanging funds on the spot market at the time an invoice is payable Refer to section 21.6

47.

Long-run exposure to exchange rate risk relates to:    A.  daily variations in exchange rates. B.  variances between spot and future rates. C.  unexpected changes in relative economic conditions. D.  differences between future spot rates and related forward rates. E.  accounting gains and losses created by fluctuating exchange rates. Refer to section 21.6

48.

The type of exchange rate risk known as translation exposure is best described as:    A.  the risk that a positive net present value (NPV) project could turn into a negative NPV project because of changes in the exchange rate between two countries. B.  the problem encountered by an accountant of an international firm who is trying to record balance sheet account values. C.  the fluctuation in prices faced by importers of foreign goods. D.  the variance in relative pay rates based on the currency used to pay an employee. E.  the variance between the revenue of an exporter who uses forward rates and an equivalent exporter who does not use forward rates. Refer to section 21.6

49.

Which of the following statements are correct? I. The usage of forward rates increases the short-run exposure to exchange rate risk. II. Accounting translation gains and losses are recorded in the equity section of the balance sheet. III. The long-run exchange rate risk faced by an international firm can be reduced if a firm borrows money in the foreign country where the firm has operations. IV. Unexpected changes in economic conditions are classified as short-run exposure to exchange rate risk.    A.  I and III only B.  II and III only C.  I, II, and III only D.  II, III, and IV only E.  I, III, and IV only Refer to section 21.6