The Degree to Which Changes in the Fair Value of a Forward

question 26

Multiple Choice

The degree to which changes in the fair value of a forward contract offset changes in the fair value or cash flows of a hedged item, describes:

• A) hedge exposure.
• B) transaction exposure.
• C) hedge effectiveness.
• D) transaction variability.

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Definitions:

Postdated Check

A check written with a date in the future, preventing it from being cashed or deposited until that date.

Reversing Entry

An accounting entry that effectively cancels out a previous entry, typically used at the beginning of a new accounting period to simplify record-keeping.

Collection Of The Note

The process of receiving the payment due from the issuer as specified in the note payable.