If a firm is due to be paid in euros in two months,to hedge against exchange rate risk the firm should
A) sell foreign exchange futures short.
B) buy foreign exchange futures long.
C) stay out of the exchange futures market.
D) do none of the above.

Question

Quizplus · Accepted Answer

Selling foreign exchange futures short allows the firm to lock in a price at which they can sell euros in the future, thus hedging against the risk of the euro depreciating in value over the next two months.

If a Firm Is Due to Be Paid in Euros