The use of an exchange rate forward contract assures the FI of the opportunity to buy (or sell) the foreign currency at a future time at a known price.

Question

Quizplus · Accepted Answer

This statement is true. A forward contract allows an FI to lock in a specific exchange rate for the purchase or sale of a foreign currency at a future date, providing certainty in pricing and minimizing exposure to exchange rate fluctuations.

The Use of an Exchange Rate Forward Contract Assures the FI