A U.S. company has suppliers in Singapore, who require payment in Singapore dollars. Which investment hedges the exchange risk associated with these suppliers? A. Forward sale in Singapore dollars B. Short futures in Singapore dollars C. Put option in Singapore dollars D. Forward purchase in Singapore dollars

Respuesta :

Answer: D. Forward purchase in Singapore dollars

Explanation:

Buying Forward is when parties negotiate the purchase of a good at a price decided in the present but with delivery taking place some time in future.

It is usually done if people believe prices will change in future and therefore act to remove that risk.

By agreeing a Forward Purchase now, that is by agreeing to buy goods from their suppliers in Singapore in Singaporean dollars at the present which will be picked up in future they can set a price now that they will pay even if the exchange rate changes.

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