Which of the Following Is Cited as a Good Reason

question 38

Multiple Choice

Which of the following is cited as a good reason for NOT hedging currency exposures?

• A) Shareholders are more capable of diversifying risk than management.
• B) Currency risk management through hedging does not increase expected cash flows.
• C) Hedging activities are often of greater benefit to management than to shareholders.
• D) All of the above are cited as reasons NOT to hedge.

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Definitions:

Initial Cash Outlay

The immediate amount of cash required to initiate a project, investment, or purchase.

Conventional

Based on or in accordance with what is generally done or believed.

Independent

Characterizes an entity or person free from outside control or influence, often highlighting autonomy in decision-making.