Firms engaged in international trade can reduce exchange-rate risk by:

Question

Quizplus · Accepted Answer

Hedging in the futures market can help firms mitigate exchange-rate risk by locking in a specific exchange rate for future transactions. This can provide certainty and protect against unfavorable exchange rate fluctuations. Choosing reputable firms and buying on credit may also be helpful strategies, but they do not directly address exchange-rate risk. Paying for foreign goods only when they are delivered may actually increase exchange-rate risk, as the firm will be exposed to any changes in exchange rates between the time of order and the time of payment.

Firms Engaged in International Trade Can Reduce Exchange-Rate Risk By