Xin is selling his transformer over the internet for C$500.An interested buyer says he is willing to pay 360 euro in six months.What position should Xin take to eliminate his foreign exchange exposure?
A)500 long Canadian forward contract
B)500 short Canadian forward contract
C)360 long euro forward contract
D)360 short euro forward contract

Question

Quizplus · Accepted Answer

Xin should take a short position in a euro forward contract to lock in the exchange rate at which he will convert the 360 euros into Canadian dollars in six months, thus eliminating his foreign exchange exposure.

Xin Is Selling His Transformer Over the Internet for C$500