1. .

(a) Define exposure, differentiating between accounting and economic exposure. What role does inflation play?

(b) Describe at least three circumstances under which economic exposure is likely to exist.

(c) Of what relevance are the international Fisher effect and purchasing power parity to your answers to parts a and b?

(d) What is exchange risk, as distinct from exposure?

(e) Under what circumstances might multinational firms be less subject to exchange risk than purely domestic firms in the same industry?