Risk management tools are used to protect businesses and mitigate this risk. A futures contract is one of various derivative instruments often used to minimize risk related to global currency fluctuations.

An airplane manufacturer in the United States is building a new type of 747 airplane, and an airline in Spain is first in line to buy the new model. They negotiate a price of $100 million in January, and the plane should be delivered by September. In this scenario, how can the manufacturer use a Futures Contract to minimize its currency risk exposure?

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Using a Futures Contract to Minimize Currency Risk Exposure The airplane manufacturer in the United States building a new type of 747 airplane and the ... View the full answer