In the context of managing exchange rate risks, which of the following best exemplifies a company that is engaged in forward exchange rate transactions?

A) ABC Inc. purchases foreign currency at present-day rates in anticipation of future transactions.
B) XYZ Corp. reaches an agreement with Iond bank to trade currency at a future date at the rate agreed to and specified at the time of the deal.
C) RTN Inc. simultaneously purchases and sells the currency of Zanvia at two different rates.
D) OPY Corp. diversifies its production of textiles to the global markets in which it operates.

Question

Iretomiwa Victoria Adepoju · Accepted Answer

Final Answer : B, Explanation :  B) XYZ Corp. reaches an agreement with Iond bank to trade currency at a future date at the rate agreed to and specified at the time of the deal. This is a direct example of a forward exchange rate transaction, where a company locks in an exchange rate today for a transaction that will occur in the future.

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