How do options contracts hedge exchange rate risk?
a. By giving an investor the right to buy or sell a specified amount of currency at a future date at a predetermined price
b. By giving investors the flexibility of future contracts that are market-to-market daily
c. By requiring investors to make small commitments to purchase future contracts
d. By investors buying a currency in future option
e. By allowing an investor the ability to exchange a specified amount of currency at a previously agreed exchange rate
Answer: D