A French corporation imports goods from the United State and expects to pay in U.S. dollars in six months. To hedge against potential exchange rate fluctuations, the corporatio can enter into a forward contract. What is the primary benefit of using a forward contract in this situation?

A French corporation imports goods from the United State and expects to pay in U.S. dollars in six months. To hedge against potential exchange rate fluctuations, the corporatio can enter into a forward contract. What is the primary benefit of using a forward contract in this situation?

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter31: Open-Economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 4PA

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Question

A French corporation imports goods from the United State and expects to
pay in U.S. dollars in six months. To hedge against potential exchange rate
fluctuations, the corporatio can enter into a forward contract. What is the
primary benefit of using a forward contract in this situation?

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