Transaction Exposure to Currency Risk Can Be Effectively Hedged with Which

question 20

Multiple Choice

Transaction exposure to currency risk can be effectively hedged with which of the following hedging instruments or strategies?

• A) currency forwards or futures
• B) leading and lagging
• C) international diversification *
• D) More than one of the above
• E) None of the above

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Definitions:

Natural Rate

The equilibrium unemployment rate arising from all sources except cyclical fluctuations, often considered the normal level of unemployment in an economy.

Continuous Inflation

Continuous inflation refers to a sustained increase in the general price level of goods and services in an economy over a period of time, eroding purchasing power.

Natural Rate of Unemployment

The level of unemployment that is expected in an economy without temporary fluctuations, often seen as the equilibrium state of the labor market.

Inverse Relationship

A situation where two variables move in opposite directions, meaning when one variable increases, the other decreases.