Question

Suppose that a firm builds a factory overseas, staffs it with foreign workers, uses materials supplied by foreign companies, and finances the entire operations with a loan from a foreign bank located in the same town as the factory. This firm is probably trying to greatly reduce, or eliminate, any:

a. translation exposure to exchange rate risk.
b. interest rate disparities.
c. political risk associated with the foreign operation.
d. short-run exposure to exchange rate risk.
e. long-run exposure to exchange rate risk.

Answer 1

e. long-run exposure to exchange rate risk.

Step-by-step explanation:

As firm is doing business by using resources from a foreign country. It is avoiding exchange rate risk. If they are brought from home money then it will be exposed to high exchange rate risk.