The movement of the exchange rate between two currencies can increase the total cost of a loan by making the principal repayment require more money than the original amount of the loan.

Question

Quizplus · Accepted Answer

Exchange rate fluctuations can affect the cost of a loan by impacting the amount of money required for principal repayment. If the exchange rate moves unfavorably, the borrower may need more money in their local currency to repay the loan than they originally borrowed, increasing the total cost of the loan.

The Movement of the Exchange Rate Between Two Currencies Can