Scenario: Trader's Paradise
Trader's Paradise is a global merchant that sells a variety of products. The company operates in 48 different countries (some developed, some developing) and some former communist countries. The company faces substantial risks given differing conditions in foreign exchange markets.
-To insure against potential losses that result from adverse changes in exchange rates, Trader's Paradise should use currency ________.

Question

Quizplus · Accepted Answer

Hedging is the best choice for Trader's Paradise as it involves using financial instruments such as options or futures to reduce the risk of loss from adverse movements in exchange rates. This approach can help Trader's Paradise to lock in a specific exchange rate and avoid losses due to currency fluctuations. Conversion, speculation, and arbitrage do not provide protection against exchange rate risk and may even expose the company to greater risk.

Scenario: Trader's Paradise Trader's Paradise Is a Global Merchant That Sells a Variety