Interest rates and exchange rates are theoretically equivalent in their relative impacts on the value of a firm. Yer interest rate risk is commonly considered by management as a "necessary evil" of doing business, whereas exchange rate risk is perceived as umusual and troublesome.

a. What characteristics of these two risks do you think lead management to perceive them in this way?

b. If managers handle financial price risks as they perceive them, how will these differing perceptions alter their management of exchange rate and interest rate risk?