How Can a Futures Contract Mitigate Exchange Rate Risk for an Exporting

question 36

Multiple Choice

How can a futures contract mitigate exchange rate risk for an exporting firm?

• A) Exporters can pin down the exact exchange rate they want to trade at and ensure a certain income stream.
• B) Exporters can avoid international trade and enter into contracts for domestic items only.
• C) The contract mitigates exchange rate risk by allowing exporters to avoid political risks associated with exchange rate volatility.
• D) The contract mitigates risk by allowing exporters to trade in alternate stable currencies.

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