A firm exposed to exchange rate risk can hedge its risk by

Question

Quizplus · Accepted Answer

All of the options provided are valid ways for a firm to hedge against exchange rate risk. Using the forward exchange market allows the firm to lock in a specific exchange rate for a future transaction, while borrowing in international money markets can give the firm access to funds in the currency they need without taking on the risk of exchange rate fluctuations. Utilizing foreign currency futures markets allows the firm to enter into contracts to buy or sell currencies at a predetermined price, thereby reducing uncertainty around future exchange rates.

A Firm Exposed to Exchange Rate Risk Can Hedge Its