Suppose that a firm builds a factory overseas, staffs it with foreign workers, uses materials supplied by foreign companies, and finances the entire operations with a loan from a foreign bank located in the same town as the factory. This firm is probably trying to greatly reduce, or eliminate, any:

a. translation exposure to exchange rate risk.

b. interest rate disparities.

c. political risk associated with the foreign operation.

d. short-run exposure to exchange rate risk.

e. long-run exposure to exchange rate risk.

Question

Chad Rose

Business

20 May, 14:28

Suppose that a firm builds a factory overseas, staffs it with foreign workers, uses materials supplied by foreign companies, and finances the entire operations with a loan from a foreign bank located in the same town as the factory. This firm is probably trying to greatly reduce, or eliminate, any:

a. translation exposure to exchange rate risk.

b. interest rate disparities.

c. political risk associated with the foreign operation.

d. short-run exposure to exchange rate risk.

e. long-run exposure to exchange rate risk.

+3

Answers (1)

Know the Answer?

Josue Ali · Answer 1

e. long-run exposure to exchange rate risk.

Explanation:

As firm is doing business by using resources from a foreign country. It is avoiding exchange rate risk. If they are brought from home money then it will be exposed to high exchange rate risk.