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    Question

    The traders reduce the risk of loss in currency

    fluctuations through which of the following?
    A Speculations Correct Answer Incorrect Answer
    B Arbitrage Correct Answer Incorrect Answer
    C Hedging Correct Answer Incorrect Answer
    D Cancelation Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    An investor may reduce the risk of loss from fluctuations in exchange rates by hedging with currency futures. Simply stated, hedging involves taking on one risk to offset another.

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