A U.S. company sells merchandise to a foreign company denominated in U.S. dollars. Which of the following statements is true?
A) If the foreign currency appreciates, a foreign exchange gain will result.
B) If the foreign currency depreciates, a foreign exchange gain will result.
C) No foreign exchange gain or loss will result.
D) If the foreign currency appreciates, a foreign exchange loss will result.
E) If the foreign currency depreciates, a foreign exchange loss will result.

Question

Quizplus · Accepted Answer

Since the transaction is denominated in U.S. dollars, there is no foreign exchange risk, and thus no foreign exchange gain or loss will result from changes in the foreign currency's value.

A US Company Sells Merchandise to a Foreign Company Denominated in in U.S