Maximillan Industries is located in France. The company just placed a large order with a Chinese ﬁrm for goods that will be shipped in six weeks. To provide protection from exchange rate
Movements, Maximillan should execute a(n):

Question

Quizplus · Accepted Answer

Maximillan should execute a forward trade in the current marketplace to protect from exchange rate movements. This allows the company to lock in a certain exchange rate for the future delivery of goods, eliminating the risk of unfavorable currency movements. Trading at the current LIBOR rate or engaging in uncovered interest parity or covered interest arbitrage transactions may not provide adequate protection. The option of exchanging currencies that qualify as an international Fisher exchange is not relevant in this scenario.

Maximillan Industries Is Located in France