Scenario - Aero, Inc. Aero, Inc. started from the idea of Brad Aerostle of Madison, South Dakota in 1992. Brad earned a financial degree from Harvard and had watched the financial markets for years. Armed with college credentials and knowledge, he believed he could offer needed services to individuals and companies desiring to conduct business around the globe. From the minute Brad put his idea into motion, his brainchild - Aero, Inc. - proved quite profitable. Aero, Inc. currently has over five thousand clients ranging from slightly wealthy individuals to very rich and thriving corporations around the world. Brad's skill at what he does has made his company a sought out firm by those who want to prosper in the foreign marketplace. One of the prominent concerns the clients of Aero, Inc. express is that of currency fluctuations. The clients know fluctuations in currency can wind up costing them money. Aero, Inc. alleviates its clients concern by suggesting the client enter into a situation where currencies can be exchanged at a previously agreed exchange rate as a way to hedge exchange rate movements. Which one of the following best identifies what Aero, Inc. is likely suggesting?

Question

Scenario - Aero, Inc. Aero, Inc. started from the idea of Brad Aerostle of Madison, South Dakota in 1992.  Brad earned a financial degree from Harvard and had watched the financial markets for years.  Armed with college credentials and knowledge, he believed he could offer needed services to individuals and companies desiring to conduct business around the globe.  From the minute Brad put his idea into motion, his brainchild - Aero, Inc. - proved quite profitable. Aero, Inc. currently has over five thousand clients ranging from slightly wealthy individuals to very rich and thriving corporations around the world.  Brad's skill at what he does has made his company a sought out firm by those who want to prosper in the foreign marketplace. One of the prominent concerns the clients of Aero, Inc. express is that of currency fluctuations.  The clients know fluctuations in currency can wind up costing them money.  Aero, Inc. alleviates its clients concern by suggesting the client enter into a situation where currencies can be exchanged at a previously agreed exchange rate as a way to hedge exchange rate movements.  Which one of the following best identifies what Aero, Inc. is likely suggesting?

Quizplus · Accepted Answer

Aero, Inc. is likely suggesting a currency swap, where two parties agree to exchange currencies at a previously agreed exchange rate to hedge against exchange rate movements. This would alleviate the clients' concerns about currency fluctuations.