Which of the following is considered to be an exchange rate risk?
A)devaluation
B)loss of market share
C)failure of supplier to deliver
D)obsolescence

Question

Quizplus · Accepted Answer

Devaluation refers to a situation where the value of one currency relative to another currency drops. This can affect the profitability of companies doing business in different countries. As exchange rates can fluctuate quite significantly, companies may face exchange rate risk that can impact their earnings and cash flows. Options to hedge against exchange rate risk may include purchasing foreign currency options or forward contracts. The other options listed, loss of market share, failure of supplier to deliver, and obsolescence, are not directly related to exchange rate risk.

Which of the Following Is Considered to Be an Exchange