Foreign exchange risk refers to the risk that arises from:
A) the fixed exchange rate between two currencies.
B) the variable exchange rate between two currencies.
C) tax changes in a foreign country where a multinational corporation operates.
D) the potential nationalisation of a multinational corporation's operations by a foreign government.

Question

Quizplus · Accepted Answer

Foreign exchange risk refers to the potential financial loss that a firm may incur due to fluctuations in the exchange rate between two currencies. As exchange rates are constantly changing, this makes B the correct answer. Choices A, C and D could also be sources of risk for multinational corporations, but they do not directly relate to foreign exchange risk.

Foreign Exchange Risk Refers to the Risk That Arises From