Question

A South Korean firm wants to hedge against unpredictable movements in foreign exchange rates which can make the global capital market riskier. What should the company do to achieve this?

Answer 1

the company should enter into a forward contract.

Step-by-step explanation:

Based on the information provided within the question it can be said that the in order to achieve this the company should enter into a forward contract. This is a type of contract entered by two parties in which one is obligated to buy while the other is obligated to sell at a fixed price and at a future date regardless of changes in circumstances or economy. Therefore reducing the market risk that they buyer is exposed to.