SIE practice questioneasyCurrency/exchange rate risk
An investor buys stock in a foreign company. When the U.S. dollar strengthens against the foreign currency, the value of the investment in U.S. dollar terms:
- ARises
- BIs unaffected
- CFalls✓ Correct answer
- DVaries randomly
Explanation
Why C — Falls
A stronger U.S. dollar means that foreign investments are worth less when converted back, which is exchange rate risk. The first two options are incorrect in this scenario.
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