SIE practice questionhardCurrency/exchange rate risk
An American buys a euro-denominated bond. If the euro depreciates against the dollar, the investor experiences:
- AMarket risk only
- BNo financial impact
- CCurrency/exchange rate risk✓ Correct answer
- DBusiness risk
Explanation
Why C — Currency/exchange rate risk
Foreign currency depreciation reduces the investment’s value in dollar terms, which is currency risk. The other risks are either not present or not relevant.
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