Exchange rate risk is the risk that the cash flows from a foreign project, when converted to the parent company's currency, will be worth less than was originally projected because of exchange rate changes.

Question

Quizplus · Accepted Answer

This statement is true. Exchange rate risk refers to the potential loss that a company may face due to fluctuations in currency exchange rates when converting foreign cash flows into their local currency. This risk arises because exchange rates can change rapidly and unpredictably due to various economic, political, and social factors. Companies with international operations are exposed to exchange rate risk, which can impact their profitability and financial stability.

Exchange Rate Risk Is the Risk That the Cash Flows