If you have a commitment to pay a friend in Britain 1,000 pounds in 30 days,you could remove the risk of loss due to the appreciation of the pound by:
A) Buying dollars in the forward market for delivery in 30 days
B) Selling dollars in the forward market for delivery in 30 days
C) Buying the pounds in the forward market for delivery in 30 days
D) Selling the pounds in the forward market for delivery in 30 days

Question

Quizplus · Accepted Answer

By buying pounds in the forward market for delivery in 30 days, you are locking in the exchange rate now, eliminating the risk of loss due to any appreciation of the pound during that time period. This ensures that you will be able to fulfill your commitment to pay your friend the agreed-upon amount of 1,000 pounds.

If You Have a Commitment to Pay a Friend in Britain