To Reduce the Transaction Risk,a Company Can Opt to Contract

question 101

Short Answer

To reduce the transaction risk,a company can opt to contract through financial intermediaries for future delivery of foreign currency at a set price,regardless of the spot price at that time,which is known as ____________________.

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Definitions:

Price Supports

Government interventions to maintain the market price of a commodity or product at a certain level, often to protect producers from market fluctuations.

Marketing Loan Program

A federal farm subsidy under which certain farmers can receive a loan (on a per-unit-of-output basis) to plant a crop and then, depending on the harvest price of the crop, either pay back the loan with interest or keep the loan proceeds while forfeiting their harvested crop to the lender.

Loan Price

The total financial cost of borrowing, including interest rates and any additional fees charged by the lender.

Crop Price

The market value at which a crop is traded, determined by supply and demand factors.