When a U.S. company purchases parts from a foreign company, which of the following will result in zero foreign exchange gain or loss?
A) The transaction is denominated in U.S. dollars.
B) The option strike price to sell foreign currency is less than the spot rate of the currency.
C) The option strike price to buy foreign currency is less than the spot rate of the currency.
D) The foreign currency appreciated in value relative to the U.S. dollar.
E) The foreign currency depreciated in value relative to the U.S. dollar.

Question

Quizplus · Accepted Answer

When a transaction is denominated in U.S. dollars, there is no foreign exchange risk, and thus no gain or loss, because the payment is made in the company's domestic currency.

When a US Company Purchases Parts from a Foreign Company, Which of Which