Asked by Domitille Couchet on May 29, 2024
Verified
In the context of managing exchange rate risks, when companies take advantage of spot exchange rates, they:
A) buy foreign currency at present-day rates in anticipation of future transactions.
B) make an agreement with a bank to exchange currency at some future date.
C) simultaneously purchase and sell a given amount of currency at two different rates.
D) abandon their own country's currency to adopt the most stable currency in the international market.
Spot Exchange Rates
Refers to the current exchange rate at which currencies can be traded immediately or on the spot.
- Distinguish between the various mechanisms businesses use to manage exchange rate risks.
Verified Answer
NP
Natalie PryorMay 29, 2024
Final Answer :
A
Explanation :
Buying foreign currency at present-day rates for future transactions is a direct application of using spot exchange rates to manage exchange rate risks. This allows companies to lock in costs and avoid the risk of currency value fluctuations.
Learning Objectives
- Distinguish between the various mechanisms businesses use to manage exchange rate risks.
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