How Can a Currency Futures Contract Be Used as a Hedge

question 89

Multiple Choice

How can a currency futures contract be used as a hedge against a potentially dramatic appreciation of a foreign currency that an Australian company is expecting to convert into Australian dollars?

• A)The Australian company should sell the foreign currency using futures contracts.
• B)The Australian company should buy more foreign currency futures contracts than it should sell.
• C)The Australian company should buy the foreign currency using futures contracts.
• D)This is a standard business situation that would be favorable if it were to happen,so no hedge is needed.

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