1. The foreign subsidiary of a U.S. firm is profitable when profits are measured in the foreign currency but those profits become losses when measured in U.S. dollars. This is an example of which one of the following?

   		Interest rate disparities
   		Short-run exposure to exchange rate risk
   		Long-run exposure to exchange rate risk
   		Political risk associated with the foreign operations
   		Translation exposure to exchange rate risk

1. Which one of the following most likely represents the greatest political risk for a U.S.-based firm?

   		A product assembly plant located in a foreign country
   		A foreign sales office
   		Accounting office which handles all payroll functions and is located in a foreign country
   		Natural ore mine in a foreign country
   		Sub-assembly plant in a foreign country that uses U.S. made components