Which of the following would be an example of exchange risk?
A)A bank manager embezzles $1,000,000 from the bank.
B)A bank that loses $500,000 from trading in foreign currencies.
C)A $1,000,000 loan given to a business,on which no interest or principal has been collected in 2 years.
D)A bank manager predicts interest rates will rise.However,interest rates fall causing the bank's net income to fall by $250,000.
E)All of the options are examples of exchange risk.

Question

Quizplus · Accepted Answer

Exchange risk, also known as currency risk, refers to the potential for loss in value when trading in foreign currencies. Option B is the only example that involves trading in foreign currencies and losing money as a result. The other options involve embezzlement, non-payment of a loan, and interest rate fluctuations, all of which may present operational or credit risk but not exchange risk.

Which of the Following Would Be an Example of Exchange