An international firm which imports raw materials can reduce its ________ exposure to ________ rate risk by entering into a forward contract.

Question

Quizplus · Accepted Answer

The question is referring to exchange rate risk, which is the risk that changes in exchange rates will negatively impact the firm's financial position. By entering into a forward contract, the firm can lock in a specific exchange rate for a future transaction, thus reducing their exposure to exchange rate risk. The other answer choices do not accurately describe the type of risk being addressed or the impact of a forward contract.

An International Firm Which Imports Raw Materials Can Reduce Its