A forward market contract to buy Japanese yen three months in the future at a price of *105/$will:
A)Insulate the buyer from changes in interest rates
B)Protect the buyer from changes in exchange rates
C)Lock in a profit based on current exchange rates
D)Require delivery of the yen at the Chicago Board of Trade

Question

Quizplus · Accepted Answer

A forward market contract to buy Japanese yen at a fixed price in the future protects the buyer from changes in exchange rates. It does not necessarily insulate the buyer from changes in interest rates, does not lock in a profit based on current exchange rates, and does not require delivery at a specific location such as the Chicago Board of Trade.

A Forward Market Contract to Buy Japanese Yen Three Months