From the perspective of the MNC,the most important purpose of the forward markets is the process of ________.

Question

Quizplus · Accepted Answer

For an MNC, the most important purpose of the forward markets is to manage or reduce risks through hedging. Hedging allows firms to protect against potential losses resulting from adverse changes in exchange rates, interest rates, or commodity prices. By using forward contracts, MNCs can lock in the future price of a currency or commodity, reducing their exposure to market fluctuations. While arbitraging and speculating are possible uses of forward markets, they are not as important for MNCs as risk management through hedging. Preventing default is not a purpose of forward markets, as they are designed to facilitate trading rather than guarantee payment.

From the Perspective of the MNC,the Most Important Purpose of the Forward