Motorola has a contract to buy cellular telephones in Japan in 6 months. Payment will be in Japanese yen. What type of exchange rate risk does Motorola face?

Question

Quizplus · Accepted Answer

Motorola faces transaction exchange rate risk, as they will need to convert US dollars into Japanese yen to make payment for the cellular telephones in Japan. The exchange rate between the two currencies can fluctuate within the six-month period, which can result in a loss or gain for Motorola.

Motorola Has a Contract to Buy Cellular Telephones in Japan