If a firm must pay for goods it has ordered with foreign currency, it can hedge its foreign exchange rate risk by ________.
A) selling foreign exchange futures short
B) buying foreign exchange futures long
C) staying out of the exchange futures market
D) selling foreign exchange forward contracts short

Question

Quizplus · Accepted Answer

By buying foreign exchange futures long, the firm locks in a price to purchase the foreign currency in the future, thus hedging against the risk of the currency appreciating.

If a Firm Must Pay for Goods It Has Ordered