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      Question

      Exchange rate risk in international trade is mainly

      managed through:
      A Leasing Correct Answer Incorrect Answer
      B Options & forward contracts Correct Answer Incorrect Answer
      C Factoring Correct Answer Incorrect Answer
      D Inventory turnover Correct Answer Incorrect Answer

      Solution

      Companies hedge currency fluctuations using forwards, options, swaps, which lock or insure exchange rates. • Forwards lock in a future exchange rate. • Options provide insurance-like protection. These are standard hedging instruments in international trade. Others don’t manage FX risk: • Leasing → financing method • Factoring → receivable management • Inventory turnover → operational metri

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