When a bank makes an international loan containing a clause that allows repayment in a foreign currency, the bank is exposed to
A)loan settlement risk.
B)exchange rate risk.
C)global exchange risk.
D)currency transaction risk.

Question

Quizplus · Accepted Answer

The bank is exposed to exchange rate risk because the value of the foreign currency in which the loan is to be repaid may fluctuate relative to the bank's domestic currency, affecting the amount the bank ultimately receives.

When a Bank Makes an International Loan Containing a Clause