Suppose that Boeing is to receive payment in euros in 6 month and wants to engage in hedging the firm would _______ euros on the 6-month forward market in order to protect itself from a/an of the euro?
Correct answer: B. sell; depreciation
- A. sell; appreciation
- B. sell; depreciation
- C. buy; depreciation
- D. buy; appreciation
Explanation
Because Boeing will receive euros later, it risks receiving fewer dollars if the euro depreciates. Selling euros forward locks in the exchange rate and protects against that depreciation.
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