All of the Following Are Examples of a Fair Value

question 1

Multiple Choice

All of the following are examples of a fair value hedge, except:

• A) a forward contract to sell US$ hedging a recognised trade receivable in US$.
• B) a forward contract to buy US$ hedging a highly probable purchase of inventory in US$.
• C) a forward contract to buy US$ hedging a recognised trade payable in US$.
• D) a forward contract to sell US$ hedging a recognised loan receivable in US$.

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Definitions:

Tariff

A tax imposed by a government on goods and services imported from other countries, affecting trade.

Voluntary Quota

A self-imposed limit on the quantity of goods a country exports or imports.

Elasticity of Supply

A measure of how much the quantity supplied of a good changes in response to a change in the price of that good.

Price Elasticity

The degree to which the demand for a good is responsive to changes in its price.