Exchange rate risk exists when the contract is written in terms of the foreign currency (A), and also exists in direct foreign investments and foreign portfolio investments (B). However, if the international trade contract is written in terms of the domestic currency, exchange rate risk does not exist (C). Therefore, the correct choice is D, all of the above.

Solved

Exchange Rate Risk

Question 107

Multiple Choice

Exchange rate risk

A) exists when the contract is written in terms of the foreign currency.
B) exists also in direct foreign investments and foreign portfolio investments.
C) does not exist if the international trade contract is written in terms of the domestic currency.
D) all of the above.

Correct Answer: