Exchange rate risk exists for a party to a contract if the contract is denominated in a foreign currency.

Question

Quizplus · Accepted Answer

Exchange rate risk arises when an individual or a business enters into a contract where the payment or receipt of funds is denominated in a foreign currency. This risk is due to the fluctuation in exchange rates between the two currencies, which may affect the value of the payment or receipt of funds. Therefore, option A is correct, and option B is incorrect.

Exchange Rate Risk Exists for a Party to a Contract