Companies and investors access international markets to generate external funding as well as to tap investment opportunities overseas. Your financial planner advises you to allocate 10% of your portfolio in foreign stocks for diversification purposes. Your portfolio has a total international exposure of $1,000,000, but you also face certain risks. Keeping other factors constant, which of the following statements describes the risk involved with investing in the international market?
a. The value of your investment will increase if the value of the dollar increases relative to the currencies of the investment.
b. The value of your investment will increase if the foreign stocks increase in their local markets.