Which of the following statements make the best argument for why firms should NOT hedge exchange rate risks? Exchange rate risk is irrelevant for multinational companies (MNCs) because an MNC generates cash flows in numerous currencies. The exchange rate movements of many currencies can easily, exactly offset each other. Exchange rate risk is irrelevant because many multinational companies are similarly affected by exchange rate movements. Exchange rate risk is irrelevant because investors can hedge exchange rate risk on their own. Exchange rate risk is irrelevant because stakeholders do not care about the financial distress risk that adverse effects of exchange rate movements may cause. Exchange rate risk is irrelevant because it is extremely difficult to hedge exchange risks profitably,

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23-11-2022
Business

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Which of the following statements make the best argument for why firms should NOT hedge exchange rate risks? Exchange rate risk is irrelevant for multinational companies (MNCs) because an MNC generates cash flows in numerous currencies. The exchange rate movements of many currencies can easily, exactly offset each other. Exchange rate risk is irrelevant because many multinational companies are similarly affected by exchange rate movements. Exchange rate risk is irrelevant because investors can hedge exchange rate risk on their own. Exchange rate risk is irrelevant because stakeholders do not care about the financial distress risk that adverse effects of exchange rate movements may cause. Exchange rate risk is irrelevant because it is extremely difficult to hedge exchange risks profitably,

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Qwclear Qwclear · Answer 1 · 2022-11-29T11:08:19+01:00

The statement that gives the best argument for the concern of exchange rate risks is that Exchange rate risk is irrelevant because investors can hedge exchange rate risk on their own, which means that option C should be the right answer.

Exchange rate risk refers to the risk of financial impact that occurs due to exchange rate fluctuations. The minor changes in exchange rates also have a substantial influence on the operations and profitability of the firms. It is because if a company operates on others countries denomination, any changes may risk its financial transactions in another currency. The exchange rate risk generally protects its profits from the market volatility. Businesses involved in overseas trade are the most affected by such fluctuations. The market forces of supply and demand affects foreign exchange.

Learn more about exchange rate risk at:

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