Answer:
An investment exposed to exchange-rate risk is an "uncovered" international investment.
Step-by-step explanation:
An uncovered international investment is one where the investor does not use any hedging strategies to manage or mitigate the exchange-rate risk associated with the investment. In other words, the investor is fully exposed to fluctuations in exchange rates, which can impact the return on the investment.
In contrast, a "hedged" international investment involves the use of hedging strategies, such as currency forwards or options, to manage or mitigate the exchange-rate risk associated with the investment. This can help to protect the investor from potential losses due to fluctuations in exchange rates.
"Arbitrage" refers to the practice of buying and selling assets in different markets to take advantage of price differences.
A "covered" international investment is a type of hedged investment where the investor uses a forward contract or other hedging instrument to lock in a specific exchange rate for a future transaction. This helps to protect the investor from fluctuations in exchange rates between the time the transaction is agreed upon and the time it is executed.