Answer (C) is correct . When amounts to be paid or received are denominated in a foreign currency, exchange rate fluctuations may result in exchange gains or losses. For example, if a U.S. firm has a receivable fixed in terms of units of a foreign currency, a decline in the value of that currency relative to the U.S. dollar results in a foreign exchange loss.
Answer (A) is incorrect because Expropriation risk is the risk that the sovereign country in which the assets backing an investment are located will seize the assets without adequate compensation.
Answer (B) is incorrect because The beta value in the capital asset pricing model for a multinational firm is the systematic risk of a given multinational firm relative to that of the market as a whole.
Answer (D) is incorrect because The beta value in the capital asset pricing model for a multinational firm is the systematic risk of a given multinational firm relative to that of the market as a whole. It is an undiversifiable risk.
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