Chapter 12, Problem 2ST

Discuss the condition under which exchange rate changes may actually reduce the risk of foreign investment.

Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called: A)transfer pricing. B)hedging. C)translating. D)cross-listing.

An exporter is trying to reduce transaction exposure in the face of a depreciating foreign currency, which of the following strategies would be best?    A) Paying or collecting early    B) Paying or collecting late   C) Paying bate, collecting early.   D) Paying early, collecting late