An increase in the exchange rate between a transaction date and the date of payment will cause the debtor to incur a loss.

Question

Quizplus · Accepted Answer

When the exchange rate increases, it means the debtor's local currency has depreciated against the foreign currency. Therefore, the debtor will have to pay more in their local currency to settle the same amount of foreign currency debt, resulting in a loss.

An Increase in the Exchange Rate Between a Transaction Date