Supmose your fors invests $$100000in$ a project in ltaly. At the time the exchange rate is EUR$/$USO $=$

$5125.$ One vear later the exchange rate is the same, but the Italian government has expropriated your

frmm acoets prying onvy $60\mathrm{.}000$ in compensation. This is an example of

market imperfections.

nowe of the aptions, since $$100,000=80,000$$$\frac{1\mathrm{.}25}{1\mathrm{.}00}.$

political risk.

exchange rate risk.