Slide  5 of  32
Slides developed by Jeff Madura, with additions and enhancements by Tim Richardson
Chpt 10
Relevance of Exchange Rate Risk
uArguments against relevance
–some people say that a firm’s exposure to exchange rate risk is not relevant
–one argument for irrelevance is that , according to purchasing power parity (PPP) theory, exchange rate movements should be matched by price movements
Fargues that similar costs exist across countries