If an exporter wants to limit the effect of possible changes in the exchange rate on the value of her exports, then she can adopt a strategy known as
A) floating.
B) speculating.
C) hedging.
D) appreciating.

Question

Quizplus · Accepted Answer

Hedging is a strategy that involves taking a position in the market that will offset the potential losses from adverse changes in exchange rates. By using financial instruments such as options, futures, and forward contracts, the exporter can effectively lock in a specific exchange rate for her exports, thereby avoiding the risk of currency fluctuations. Floating refers to a situation where the currency's exchange rate is allowed to be determined by the market, without any intervention from the government. Speculating involves taking a position in the market based on the expectation that the exchange rate will move in a certain direction, with the hope of making a profit. Appreciating refers to the increase in the value of a currency relative to another currency.

If an Exporter Wants to Limit the Effect of Possible