To protect against the risk of declining values of foreign currencies, an investor could

Question

Quizplus · Accepted Answer

Buying units of the home currency in the forward market is a strategy known as hedging, which can help protect against the risk of declining values of foreign currencies. By locking in a future exchange rate, investors can mitigate the risk of currency fluctuations and potentially avoid losses. Options A and B do not directly address currency risk, and option C is incorrect as there are ways to reduce the risk, such as hedging.

To Protect Against the Risk of Declining Values of Foreign