Jennifer is Accounting Manager with 5M Corporation in Pittsburgh.She wishes to purchase the equivalent of USD 500,000 worth of sprockets from a firm in the UK.Her supplier insists on receiving payment in British pounds,and expects payment upon product delivery in three months. Jennifer realizes that between the time her purchase order is received and her product arrives,the value of the British pound in U.S.dollars could increase considerably,and she could wind up paying far more than she'd anticipated due to currency exchange fluctuations.How can she employ hedging to mitigate this risk?
A) She can cross her fingers and hope for the best!
B) She can purchase $500,000 of British pounds now.
C) She can invest in Euros.
D) She can pay for the product immediately.
Correct Answer:
Verified
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