Farmer Ted planted 200 acres in wheat this year. The weather has been perfect and he expects to harvest a record crop within the next two weeks. At present, he has no storage facilities and therefore must sell his crop as soon as it is harvested. Which one of the following risks is he facing because he must sell his crop at whatever the market price is at harvest time?

a. Futures risk.

b. Volatility exposure.

c. Surplus risk.

d. Transactions exposure.

e. Translation exposure.

Question

Business

Kason Schneider

28 June, 21:35

Farmer Ted planted 200 acres in wheat this year. The weather has been perfect and he expects to harvest a record crop within the next two weeks. At present, he has no storage facilities and therefore must sell his crop as soon as it is harvested. Which one of the following risks is he facing because he must sell his crop at whatever the market price is at harvest time?

a. Futures risk.

b. Volatility exposure.

c. Surplus risk.

d. Transactions exposure.

e. Translation exposure.

+4

Answers (1)

Know the Answer?

Pamela Vazquez · Answer 1

d. Transactions exposure.

Explanation:

Transactions exposure -

It is the level of uncertainty involved in a business in the international trade face.

It is the risk which currency exchange rates would fluctuate after the firm has taken a financial obligation.

The high level of vulnerability to shift the exchange rates can lead to the loss of the major capital for the international business.

Hence from the information of the question, the correct answer is d. Transactions exposure.