If a firm is due to be paid in euros in two months, to hedge against exchange rate risk the firm should ________.
A) sell foreign exchange futures short
B) buy foreign exchange futures long
C) stay out of the exchange futures market
D) buy foreign exchange forward contracts long

Question

Quizplus · Accepted Answer

By selling foreign exchange futures short, the firm locks in the current exchange rate, protecting against the risk of the euro depreciating against their home currency.

If a Firm Is Due to Be Paid in Euros