An American manufacturer with its corporate headquarters in New York City is purchasing goods from a French supplier.Which of the following statements is true regarding the exchange rate risk for this contract?

Question

Quizplus · Accepted Answer

B is correct because if the contract is denominated in dollars, the American company does not face exchange rate risk for its currency, transferring that risk to the French company. C is also correct because if the contract is denominated in a third currency (British pounds), both companies could face exchange rate risk relative to their own currencies.

An American Manufacturer with Its Corporate Headquarters in New York