Which of the following refers to the money market hedge of a company’s payables (receivables)? 1. A company sells (buys) its foreign currency receivables (payables) forward to eliminate its exchange risk exposure. 2. A company borrows (or lends) in foreign currency to hedge its foreign currency receivables (payables), thereby matching its assets and liabilities in the same currency. 3. A company buys a currency at the place where it is priced cheaper and immediately sells it at the place where it is priced higher. 4. A company buys a foreign currency call (put) option to hedge its foreign currency payables (receivables).
Which of the following refers to the money market hedge of a company’s payables (receivables)? 1. A company sells (buys) its foreign currency receivables (payables) forward to eliminate its exchange risk exposure. 2. A company borrows (or lends) in foreign currency to hedge its foreign currency receivables (payables), thereby matching its assets and liabilities in the same currency. 3. A company buys a currency at the place where it is priced cheaper and immediately sells it at the place where it is priced higher. 4. A company buys a foreign currency call (put) option to hedge its foreign currency payables (receivables).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Which of the following refers to the
1. A company sells (buys) its foreign currency receivables (payables) forward to eliminate its exchange risk exposure.
2. A company borrows (or lends) in foreign currency to hedge its foreign currency receivables (payables), thereby matching its assets and liabilities in the same currency.
3. A company buys a currency at the place where it is priced cheaper and immediately sells it at the place where it is priced higher.
4. A company buys a foreign currency call (put) option to hedge its foreign currency payables (receivables).
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