If you owe a foreign currency denominated debt,you can hedge with
A)a long position in a currency forward contract.
B)a long position in an exchange-traded futures option.
C)buying the foreign currency today and investing it in the foreign county.
D)a long position in a currency forward contract,or buying the foreign currency today and investing it in the foreign county.

Question

Quizplus · Accepted Answer

A long position in a currency forward contract and buying the foreign currency today and investing it in the foreign country are both viable options for hedging against a foreign currency denominated debt. Both options involve locking in a specific exchange rate, which can protect against fluctuations in the value of the home currency. By using a combination of these strategies, the hedger can mitigate their exposure to currency risk and ensure that they are able to meet their debt obligations regardless of market conditions.  So, option D is the best choice.

If You Owe a Foreign Currency Denominated Debt,you Can Hedge