To protect itself against transaction exchange rate risk, a U.S.company that purchases automobiles from a Japanese manufacturer may use all of the following techniques except:

Question

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Selling yen in the spot market at the time of each transaction would not protect the U.S. company against transaction exchange rate risk, as it involves exchanging currencies at the current spot rate rather than fixing a future rate through forward contracts or futures contracts. The other options listed (borrowing funds to invest in interest-bearing securities, executing a contract in the forward exchange market, and executing a contract in the foreign exchange futures market) are all effective ways for the company to hedge against exchange rate risk.

To Protect Itself Against Transaction Exchange Rate Risk, a U