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If a US company wants to hedge a prospective loss in a foreign entity investment from...

If a US company wants to hedge a prospective loss in a foreign entity investment from a foreign currency fluctuation, which of the following actions is recommended:

A. The US company should purchase a forward to swap currency of the foreign entity's local currency for US currency.
B. The US company should purchase a call option to buy currency of the foreign entity's local country.
C. The US company should issue a loan to the foreign entity's local bank.
D. The US company should borrow from the foreign entity's local bank.

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Answer #1
If a US company wants to hedge a prospective loss in a foreign entity investment from a foreign currency fluctuation, which of the following actions is recommended:
A. The US company should purchase a forward to swap currency of the foreign entity's local currency for US currency.
B. The US company should purchase a call option to buy currency of the foreign entity's local country.
C. The US company should issue a loan to the foreign entity's local bank.
D. The US company should borrow from the foreign entity's local bank. Correct Exchange rate risk cannot be avoided when investing overseas, but it can be mitigated considerably through the use of hedging techniques such as Invest in hedged assets
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