An Example of Hedging to Control Currency Exchange Rate Risk

question 2

Multiple Choice

An example of hedging to control currency exchange rate risk is a wine distributor ____.

• A) currently importing wine made from the 2010 vintage
• B) paying for wine today that will be delivered in three years
• C) that visits the vineyard where wine is made before buying the vintage
• D) that settles all of its bills with euros

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Definitions:

Physiological Reaction

Automatic, involuntary bodily responses to stimuli, influenced by the nervous and endocrine systems.

Autonomic Nervous System

The part of the nervous system that controls involuntary bodily functions such as heart rate, digestion, and respiratory rate.

Fight-Or-Flight

A physiological response to perceived threats, preparing the body to either confront or flee from the threat.

Thalamus

A neural structure serving as a conduit for signal transmission of sensory data to the cerebral cortex.