Hedging foreign currency transactions can be accomplished by:
A)equal amounts of receivables and payables in foreign currencies.
B)the purchase of future contracts.
C)the purchase of foreign currencies to be received in the future.
D)all of the above.

Question

Quizplus · Accepted Answer

Hedging foreign currency transactions can be accomplished in several ways. One way is to have equal amounts of receivables and payables in foreign currencies, which creates a natural hedge. Another way is to use financial instruments like futures contracts to lock in exchange rates for future foreign currency transactions. Lastly, purchasing foreign currencies in advance can act as a hedge when receivables or payables arise in the future, as the exposure to foreign exchange rate changes is reduced. Therefore, all of the above choices can be used to hedge foreign currency transactions.

Hedging Foreign Currency Transactions Can Be Accomplished By