Companies may be motivated to enter into a foreign currency swap in order to hedge receivables held in the currency of the loan,the obligations of which they will undertake in the swap.

Question

Quizplus · Accepted Answer

This statement is true. By entering into a foreign currency swap, companies can hedge against the risk of fluctuations in the exchange rate between the currency in which they hold receivables and the currency in which they have borrowed. This allows them to protect their cash flow and avoid potential losses.

Companies May Be Motivated to Enter into a Foreign Currency