Which one of the following statements is most likely to be correct? A) The use of forward contract increases the short-run exposure to exchange rate risk. B) An exposure to exchange rate risk can be the risk that a positive net present value (NPV) project could turn into a negative NPV project because of changes in the exchange rate between two countries. C) Investing U.S. dollars when a project is launched and using the investment proceeds to pay the invoice is the primary way of reducing exposure to exchange rate risk. D) A firm can record a profit on its income statement from a foreign subsidiary even when that subsidiary has no profit thanks to exchange rate risk. E) A U.S. importer typically eliminates exposure to exchange rate risk by exchanging funds on the spot market at the time an order is placed with a foreign supplier.

A firm can record a profit on its income statement from a foreign subsidiary even when that subsidiary has no profit thanks to exchanging rate risk.

Foreign subsidiary

A foreign subsidiary is a company operating overseas that is part of a larger corporation with headquarters in another country, often known as a parent company or a holding company.

What is a foreign subsidiary strategy?

Setting up a foreign subsidiary establishes a legal entity in another country. Legal entities can market their products and services to the local population. They can also import and export goods.

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