Yelton Co. just sold inventory for 80,000 euros, which Yelton will collect in sixty days. Briefly describe a hedging transaction Yelton could engage in to reduce its risk of unfavorable exchange rates.
What will be an ideal response?
Yelton could sign a forward exchange contract to sell the euros in 60 days, after they are received. Alternatively, Yelton could purchase an option to sell the euros in 60 days, after they are received.
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