Final answer:
Companies involved in international transactions face currency risk, political risk, and market risk, so the correct answer is 'All of the above.' These risks are considered by businesses and investors, impacting investment strategies and potential returns in the foreign exchange markets.
Step-by-step explanation:
The types of risk companies are exposed to in international transactions include currency risk, political risk, and market risk. Thus, the correct answer is 4) All of the above.
Currency risk involves the potential for losses due to fluctuation in exchange rates. Political risk can arise from unstable or unpredictable political environments that may affect business operations, such as changes in policy or regulations. Market risk refers to the possibility of financial loss because of changes in market conditions, like shifts in demand and supply or macroeconomic factors. These risks affect decisions by firms in international trade, tourists, international ownership investors, and financial non-ownership investors when dealing with foreign exchange markets.
Understanding and analyzing these risks is crucial for investors in the financial market, as it impacts investment strategies and the potential return on their investments. Investors must consider the demand and supply of different currencies and how it might influence their costs and the value of their investments. Managing these risks is an important aspect of successful international business transactions.