Simon Corp., a US company, has made a large sale to a French company on a 120-day account payable in euros. If management of Simon wants to Hedge the transaction risk related to a decline in the value of the euro, which of the following strategies would be appropriate?
a. Lend euros to another company for payment in 120 days.
b. Enter into a forward exchange contract to purchase euros for delivery in 120 days.
c. Enter into a futures contract to sell euros for delivery in the future.
d. Purchase euros on the spot market.
Answer: c. Selling euros in the future market, the firm has locked in the exchange rate today.