In the Context of Managing Exchange Rate Risks, Which of the Following

question 16

Multiple Choice

In the context of managing exchange rate risks, which of the following statements is true of forward exchange rate transactions?

• A) It involves the purchase of foreign currency at present-day rates in anticipation of future transactions.
• B) It involves the simultaneous purchase and sale of a given amount of currency at two different forward rates.
• C) The forward rate at which a company and a bank agree to exchange currency is same as the spot rate.
• D) The forward rate is a prediction of future spot rates that allows a company to bypass uncertainty in the currency market.

---

Definitions:

Multinational Strategy

A plan, used by international companies that involves customizing products, promotion, and distribution according to cultural, technological, regional, and national differences.

Absolute Advantage

A concept in international trade theory that occurs when a country can produce a good more efficiently and at a lower cost than another country.