Question

You are a US firm with significant real estate holdings in Toronto. You are worried that...

  1. You are a US firm with significant real estate holdings in Toronto. You are worried that changes in the USD to CAD exchange rate could affect your debt to equity ratio. You are worried about:
    1. Operating exposure
    2. Transaction exposure
    3. Translation exposure
    4. Repricing risk
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Answer #1

The answer is c) translation exposure

Translation exposure is related to change in the value of assets/liabilities locates outside the country of incorporation due to change in forex rate

Why other options are incorrect

D) reprising risk is the risk of change in interest rate

B) transaction risk is related to the risk related to change value of international transactions due to change in interest rate

C) operating risk - is related to change in NPV of firm due to change in forex rate

I hope this helps

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