The following describes a long-run exposure of exchange rate risk. You sell custom-designed
refrigerators in Canada. The refrigerators are manufactured in Mexico and it takes about 60 days
from the time you agree to a sale and accept payment in Canada until you take delivery of the
refrigerator and pay the Mexican ﬁrm. Your proﬁt, therefore, is affected by changes in the
dollar/peso exchange rate between the order and delivery dates.

Question

Quizplus · Accepted Answer

The scenario describes a short-run exposure to exchange rate risk, as it involves a specific transaction with a defined time frame of 60 days. Long-run exposure involves ongoing operations and long-term financial planning.

The Following Describes a Long-Run Exposure of Exchange Rate Risk