A firm that sells goods to foreign countries on a regular basis can avoid exchange-rate risk by
A)buying stock options.
B)selling puts on financial futures.
C)using a foreign exchange swap.
D)buying swaptions.

Question

Quizplus · Accepted Answer

A foreign exchange swap allows a firm to exchange one currency for another at an agreed-upon exchange rate for a specified period of time. This can help a firm avoid exchange-rate risk as they can lock in a favorable exchange rate for their transactions. Buying stock options, selling puts on financial futures, and buying swaptions are all options and futures strategies that do not provide as direct a hedge against exchange-rate risk as a foreign exchange swap.

A Firm That Sells Goods to Foreign Countries on a Regular