Question
5.7) Which of the two statements regarding translation risk is true? A Translation risk should always be hedged because of its immediate cash-flow effect. B
5.7) Which of the two statements regarding translation risk is true? A Translation risk should always be hedged because of its immediate cash-flow effect. B Translation risk occurs when the balance sheet items of a company are nominally translated into another currency. C Translation risk is forward looking and long-term. D Translation risk is not cash-flow effective immediately but it may become so in the future when the asset in question is sold. Therefore, from a cash-flow perspective hedging can make sense under certain circumstances. E Translation risk affects companies that have no international operations at all.
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