1) Money and Risk Coverage

In doing business and making exchanges (trading) with each other, countries and people cover their risks by acquiring the currencies they need (which fluctuate within certain price ranges for purchases and sales) especially from international banks (e.g., CITIBank, Chase, and Bank of America). These buyers of foreign currency can buy spot or for deliveries of the needed currencies on certain dates in the future.

Using very crisp language, demonstrate giving cogent reasons why and when a) to what extent is it advantageous for some businesspersons to purchase the currency of the foreign country from which they want to buy (ahead of time), and b) to what extent is the US currency buyer is in jeopardy if (say), the currency for future delivery --- in the final analysis --- faces a situation where that foreign currency experiences a very steep decline in value against the US dollar? What are the benefits achieved on both sides when businesspersons use the Letter of Credit instrument (see videos) to cover their risks of doing business with complete strangers in other countries?

2) Exchange Rates

After Bretton Woods, countries decided to peg (tie) their domestic currencies to the US dollar. Using very crisp language, give cogent reasons why and when is it advantageous for some countries, to peg their currencies to a basket of currencies of their MAIN trading partners instead? What impact can doing this have on business persons or businesses trying to do business with countries whose currencies are so pegged? What are the dynamics?