The Preferred Way to Hedge Transaction Exposure to Currency Risk

question 7

Multiple Choice

The preferred way to hedge transaction exposure to currency risk is ______. *

• A) by offsetting exposures within the firm
• B) through forward currency contracts
• C) through futures contracts
• D) through swap contracts
• E) None of the above-exposures should be left unhedged

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Definitions:

Straight Line

A direct, shortest path between two points in a plane, often used in mathematics to describe linear functions.

Horizontal Axis

In a graph or chart, the x-axis, representing the independent variable or the base line for measuring.

Vertical Axis

In a graph or chart, the y-axis which typically represents the dependent variable or outcome in relation to the independent variable on the horizontal axis.

Slope

In mathematics, the measure of the steepness or incline of a line, typically defined as the ratio of the vertical change to the horizontal change between two points on the line.