A japanese IMPORTER has a $1,250,000 PAYABLE due in one year. The spot rate is $1V100. The one-year forward rate is $1V120. Forward contract size is V12,500,000. Detail a strategy using forward contracts that will hedge his exchange rate risk, OA. Go short in 12 yen forward contracts. OB. Go long in 12 yen forward contracts. OC. Go short in 16 yen forward contracts. D. Go long in 16 yen forward contracts.

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.