Which of the Following Statements Is False

question 28

Multiple Choice

Which of the following statements is false?

• A) The most common method firms use to reduce the risk that results from changes in exchange rates is to hedge the transaction using currency forward contracts.
• B) Fluctuating exchanges rates cause a problem known as the importer-exporter dilemma for firms doing business in international markets.
• C) Exchange rate risk naturally arises whenever transacting parties use different currencies: Both of the parties will be at risk if exchange rates fluctuate.
• D) Because the supply and demand for currencies varies with global economic conditions, exchange rates are volatile.

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Definitions:

Principal

The initial sum of money that is invested or lent, used as the foundation for calculating interest and returns.

Assignor

An individual or entity that transfers the rights or interests of a contract to another party, known as the assignee.

Assignee

A party or person who receives rights or interests from another, referred to as the assignor.

Delegator

An individual or entity that assigns responsibility or authority to another party to carry out specific activities or tasks.