A U.S. firm has received a large amount of cash inflows periodically in Swiss francs as a result of exporting goods to Switzerland. It has no other business outside the U.S. It could best reduce its exposure to exchange rate risk by:

Question

Quizplus · Accepted Answer

Issuing Swiss franc-denominated bonds would create a natural hedge, as the firm would have both inflows and outflows in Swiss francs, reducing its exposure to exchange rate fluctuations.

A US Firm Has Received a Large Amount of Cash Inflows