One of the Drawbacks of Using Forward Contracts to Hedge

question 57

Multiple Choice

One of the drawbacks of using forward contracts to hedge foreign-exchange risk is that the:

• A)transaction costs in the forward market are high.
• B)forward rates are always lower than spot rates.
• C)hedged currency could appreciate during the period.
• D)hedged currency could depreciate during the period.

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Definitions:

Economy of Canada

The economic structure of Canada, characterized by its extensive natural resources, highly developed trade networks, and diverse sectors including manufacturing, services, and technology.

Family of Origin

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Possibilities and Limitations

Concepts referring to the potential and constraints in achieving certain goals or outcomes within given contexts or systems.

Weber's Concept

Refers to the theories and methodologies introduced by sociologist Max Weber, including the notion of bureaucracy, Protestant ethic, and the significance of social actions in understanding society.