When exchange rates are ______, agreeing to wait for one week from today to engage in an international transaction carries ______.
A) flexible rather than fixed; less risk
B) flexible rather than fixed; the same amount of risk
C) flexible rather than fixed; more risk
D) fixed rather than flexible; the same amount of risk

Question

Quizplus · Accepted Answer

When exchange rates are flexible, they can fluctuate rapidly, which makes agreeing to wait for one week from today to engage in an international transaction carry more risk. This is because the exchange rate may change in a way that is unfavorable to one party during that week, leading to potential losses. When exchange rates are fixed, there is less risk because the rate is predetermined and is less likely to change rapidly.

When Exchange Rates Are ______, Agreeing to Wait for One