Economic Awareness - Sectors of Indian Economy
Which of the following statements about the 'exchange rate risk' is INCORRECT?
Which of the following statements about the 'exchange rate risk' is INCORRECT?
hard Q9 of 15
Step-by-Step Solution
Step 1: Understand exchange rate risk
Exchange rate risk arises from unpredictable changes in currency values affecting international transactions.Step 2: Analyze forward contracts
Forward contracts help hedge but cannot completely eliminate all exchange rate risk due to counterparty risk and market factors.Step 3: Evaluate other options
Exporters/importers are affected, and exchange rate risk is synonymous with currency risk.Final Answer:
It can be completely eliminated through forward contracts → Option CQuick Check:
It can be completely eliminated = correct ✅
Quick Trick: Forward contracts reduce but don't fully remove risk.
Common Mistakes:
MISTAKES- Assuming forward contracts guarantee zero exchange rate risk.
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