Asked by Brittany Whitworth on May 26, 2024
Verified
Your firm buys plumbing products in Asia and sells them in Canada at a substantial discount to plumbing products manufactured in Canada. However, the strengthening economies in Asia have increased Asian demand for their own plumbing products, pushing up local prices and damaging your ability to undercut your Canadian competitors. The following was an example of a short run exchange rate risk.
Short Run Exchange Rate Risk
The potential for investors to experience losses due to fluctuations in exchange rates in the short term.
Strengthening Economies
Describes the phase wherein economies are experiencing growth in GDP, employment rates, and productivity, indicating an overall improvement in economic health.
Plumbing Products
Items or systems installed in buildings for the distribution of water for drinking, heating and washing, and the removal of waterborne wastes.
- Comprehend the hazards linked to fluctuations in exchange rates, encompassing short-term, long-term, and translation exposure.
Verified Answer
SA
Shagun AgarwalMay 30, 2024
Final Answer :
False
Explanation :
This scenario describes a change in supply and demand dynamics affecting product prices, not a direct exchange rate risk. Exchange rate risk involves changes in the value of currencies affecting the cost of transactions, not the internal market dynamics of supply and demand for goods.
Learning Objectives
- Comprehend the hazards linked to fluctuations in exchange rates, encompassing short-term, long-term, and translation exposure.