An exporter faced with exposure to an appreciating currency can reduce transaction exposure with a strategy of
A)paying or collecting early.
B)paying or collecting late.
C)paying late,collecting early.
D)paying early,collecting late.

Question

Quizplus · Accepted Answer

Paying early and collecting late allows the exporter to receive payment in a currency that has not yet appreciated while making payment in a currency that is still weaker. This strategy reduces transaction exposure because it minimizes the risk of exchange rate movements between the time the exporter makes payment and receives payment. Thus, the exporter can effectively lock in a favorable exchange rate.

An Exporter Faced with Exposure to an Appreciating Currency Can