Buying Currency in the Forward Market Is a Costly Way

question 115

True/False

Buying currency in the forward market is a costly way of hedging the currency risk.

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Definitions:

Cost of Debt

The effective rate that a company pays on its total debt, serving as a measure of the risk and a way to gauge the company's ability to manage its debt effectively.

Shares Outstanding

The total number of shares of a company’s stock that are currently owned by all its shareholders.

Equity Firm

A company that invests in businesses, typically taking a sizable stake, with the goal of increasing value over time before eventually divesting.

Borrowing

This is the act of obtaining funds from a lender under the agreement to pay back the principal amount along with interest.