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CFA Level 2
Financial Reporting and Analysis

Hedging Currency Risk with Forward Contracts

Very Easy Multinational Operations Hedging Currency Risk

A multinational corporation based in the United States has significant sales in Europe, which presents exposure to exchange rate fluctuations between the U.S. dollar and the euro. To manage this risk, the corporation considers using financial instruments to hedge its currency exposure.

Which of the following strategies would best help the corporation mitigate its currency risk?

Hint

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% Correct72%