If an importer purchases a product today but does not pay forit for 90 days, the

Question

If an importer purchases a product today but does not pay forit for 90 days, the importer is exposed to exchange rate risk. Howcould the importer protect against such risk?
a. By purchasing foreign currency in the spot market. b. With the purchase of an IMO. c. With the purchase of a forward exchange contract. d. Purchase of an international trade contract. e. By going out of business. If an importer purchases a product today but does not pay forit for 90 days, the importer is exposed to exchange rate risk. Howcould the importer protect against such risk?
a. By purchasing foreign currency in the spot market. b. With the purchase of an IMO. c. With the purchase of a forward exchange contract. d. Purchase of an international trade contract. e. By going out of business.

Explanation / Answer

This protects the buyer againstthe risk of fluctuating rates when acquiring foreign exchangeneeded to meet future obligations.
So Its like saying I will payyou 10 dollar worth of the candy no matter what the price of candyis on that day in the future

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