In order to protect against foreign exchange risk,firms can use
A)the spot market for foreign exchange.
B)interest rate arbitrage.
C)purchasing power parity.
D)the forward market for foreign exchange.
E)the J-curve.

Question

Quizplus · Accepted Answer

The forward market for foreign exchange allows firms to lock in an exchange rate for a future transaction, thereby protecting against fluctuations in the currency market. This is a common strategy used by multinational corporations to reduce their exposure to foreign exchange risk.

In Order to Protect Against Foreign Exchange Risk,firms Can Use