An American manufacturer with its corporate headquarters in New York City is purchasing goods
from a French supplier. Which of the following statements is true regarding the exchange rate risk
for this contract?
A) The American company will bear all of the exchange rate risk if the contract is denominated
in dollars.
B) The French company will bear all of the exchange rate risk if the contract is denominated in
dollars.
C) Both companies could bear exchange rate risk if the contract is denominated in British
pounds.
D) Both B and C are correct.
D
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Indicate whether the statement is true or false