The Structure of a Money Market Hedge Is Similar to a Forward

question 47

True/False

The structure of a money market hedge is similar to a forward hedge. The difference is the cost of the money market hedge is determined by the differential interest rates, while the forward hedge is a function of the forward rates quotation.

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Definitions:

Dishonored

A term used to describe a cheque or negotiable instrument that a bank refuses to pay or accept due to insufficient funds or other reasons.

Accounting Equation

A fundamental principle in finance that states assets equal liabilities plus equity.

Note Settlement

The process of fulfilling the obligations of a promissory note, typically involving the payment of the principal and accrued interest.

Past Due Account

An account receivable that has not been paid by the due date, typically subject to late fees or other penalties until settled.