Assume that your company has an equity position in a French firm. Explain the condition under which the dollar/franc exchange rate uncertainty does not comprise exchange exposure for your company.
Answer: Mere changes in exchange rates do not essentially comprise currency exposure. If the French franc value of the equity moves in the reverse direction to the extent that the dollar value of the franc changes, after that the dollar value of the equity position will be insensitive to exchange rate movements. The result of it is your company will not be exposed to currency risk.