A South Korean firm wants to hedge against unpredictable movements in foreign exchange rates which can make the global capital market riskier. What should the company do to achieve this?

Question

Fletcher Glover

Business

3 April, 03:39

A South Korean firm wants to hedge against unpredictable movements in foreign exchange rates which can make the global capital market riskier. What should the company do to achieve this?

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Answers (1)

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Demarion Brennan · Answer 1

the company should enter into a forward contract.

Explanation:

Based on the information provided within the question it can be said that the in order to achieve this the company should enter into a forward contract. This is a type of contract entered by two parties in which one is obligated to buy while the other is obligated to sell at a fixed price and at a future date regardless of changes in circumstances or economy. Therefore reducing the market risk that they buyer is exposed to.