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Which type of financial risk arises from potential adverse movements in foreign exchange rates affecting international transactions?

ACredit Risk
BDefault Risk
CTransaction Risk
DOperational Risk

Explanation

* Transaction Risk occurs when currency exchange rates fluctuate between commitment contract date and financial settlement date.
* Translation Risk involves converting foreign subsidiary financial statements into parent currency.
* Economic Risk reflects long-term cash flow sensitivity to foreign exchange changes.

Exam Relevance
  • Topic: International Finance
  • Subtopic: Foreign Exchange Risk
Submitted by: mcqstutor Team More Finance & Accounting MCQs →

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