1) Transaction exposure involves the exchange rate risk to an international firm's foreign currency earnings. T or F.

2) Transaction exposure can be hedged by:

a. currency futures contracts

b. currency foreward contracts

c. currency options contracts

d. all of the above

3) Contingent exposure refers to a situation where the firm may or may not be exsposed to exchange rate-------------.

4) The swap rate refers to an agreement to exchange one currency for another at a predetermined exchange rate on a----------------of future dates.

5) Hedging foreign exchange exposure in "imperfect" capital markets is a good idea because:

a. management of a foreign firm knows its foreign exchange exposure better than stockholders

b. transaction costs fpr hedges for the firm are lower than for individual shareholders

c. corporate hedging reduces the probabilty of default

d. all of the above