Exchange rate risk refers to
A) An expected drop in an exchange rate.
B) A highly stable exchange rate.
C) Lower profit due to an expected drop in an exchange rate.
D) Lower profits due to an unexpected change in exchange rates.

Question

Quizplus · Accepted Answer

Exchange rate risk refers to the possibility of lower profits due to unexpected changes in exchange rates. A and B are incorrect because they refer to expected or stable exchange rates, which do not pose a risk. C is partially correct in the sense that lower profit may result from a drop in exchange rates, but it does not capture the risk element of the definition.

Exchange Rate Risk Refers to