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Question 1 a) How would you define transaction exposure? How is it different from economic exposure? b) Should a firm hedge? Why or why not?

Question 1

a) How would you define transaction exposure? How is it different from economic exposure? b) Should a firm hedge? Why or why not? c) Explain the basic differences between the operation of a currency forward market and a futures market. d) How would you define economic exposure to exchange risk?

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