Question : What is the term used to describe the risk that changes in exchange rates will affect the value of future cash flows associated with an investment or business operation?
Option 1: Currency risk
Option 2: Liquidity risk
Option 3: Market risk
Option 4: Systemic risk
Correct Answer:
Currency risk
Solution : The correct answer is a) Currency risk
Currency risk refers to the potential for fluctuations in exchange rates to impact the profitability or value of investments, trade transactions, or financial obligations denominated in foreign currencies. It arises from the uncertainty and volatility in exchange rates and can have significant implications for businesses and investors engaged in international activities.
