Exchange-rate risk arises from the fact that the spot exchange rate on a future date is unknown today.

Question

Quizplus · Accepted Answer

Exchange-rate risk is the risk that the value of a financial contract's cash flows may fluctuate due to changes in exchange rates between the time the contract is signed and the time it is settled. This risk arises because the exchange rate on a future date is uncertain and cannot be predicted with certainty today. Therefore, option A is the correct answer.

Exchange-Rate Risk Arises from the Fact That the Spot Exchange