Farmer Ted planted 200 acres in wheat this year. The weather has been perfect and he expects to harvest a record crop within the next two weeks. At present, he has no storage facilities and therefore must sell his crop as soon as it is harvested. Which one of the following risks is he facing because he must sell his crop at whatever the market price is at harvest time?

Question

Quizplus · Accepted Answer

Transactions exposure refers to the risk of exchange rate fluctuations affecting the value of transactions that are already contracted for. In this case, Farmer Ted is exposed to the risk of price fluctuations in the market at the time of harvest, which is a form of transactions exposure.

Farmer Ted Planted 200 Acres in Wheat This Year