Motorola has a contract to deliver cellular telephones in Japan in 6 months from now and the payment for these telephones will be in Japanese yen.What type of foreign exchange risk does Motorola face?

Question

Quizplus · Accepted Answer

Motorola faces transaction exposure, which is the risk that arises from a company's contractual obligations that are denominated in a foreign currency. In this case, the payment for the telephones will be in Japanese yen, exposing Motorola to the risk of fluctuations in the exchange rate between the yen and the currency in which Motorola operates.

Motorola Has a Contract to Deliver Cellular Telephones in Japan