An exporter can hedge against the possible decline in a foreign currency by purchasing

Question

Quizplus · Accepted Answer

When an exporter purchases put options on a currency, they have the right but not the obligation to sell that currency at a predetermined exchange rate. This provides protection against a possible decline in the value of that currency. If the exchange rate does decrease, the exporter can exercise the option and sell the currency at the higher predetermined rate, avoiding losses.

An Exporter Can Hedge Against the Possible Decline in a Foreign