Currency futures can be used by MNCs to hedge payables. That is, an MNC would ____ futures to hedge a foreign payable position. Also, currency futures can be used for speculation. For example, a speculator expecting a currency to appreciate would ____ futures.
A) buy; buy
B) sell; sell
C) buy; sell
D) sell; buy

Question

Currency futures can be used by MNCs to hedge payables. That is, an MNC would ____ futures to hedge a foreign payable position. Also, currency futures can be used for speculation. For example, a speculator expecting a currency to appreciate would ____ futures.​
A) ​buy; buy
B) ​sell; sell
C) ​buy; sell
D) ​sell; buy

Quizplus · Accepted Answer

To hedge a foreign payable position, an MNC would buy currency futures as it would want to protect itself against the currency risk. On the other hand, a speculator expecting a currency to appreciate would also buy currency futures to profit from the expected rise in value. Therefore, the correct choice is A, which suggests buying currency futures in both scenarios.

Currency Futures Can Be Used by MNCs to Hedge Payables