A Firm Intends to Hedge Against Exchange Loss,a Large Future

question 28

Multiple Choice

A firm intends to hedge against exchange loss,a large future payment that must be made in a foreign currency.Which of the following identifies the cost of such a hedge?

• A) Difference between expected and current spot rates
• B) Difference between expected and current forward rates
• C) Difference between the forward premium and the forward discount
• D) Difference between the forward rate and the expected future spot rate

---

Definitions:

Body Mass Index (BMI)

A numerical computation of a person's weight in relation to height, used to assess whether they fall within a healthy weight range.

Classification

The systematic arrangement in groups or categories according to established criteria.

Storage Fat

Body fat that is accumulated and stored in the body, serving as an energy reserve and providing insulation and protection for organs.

Adipose Tissue

The biological term for body fat, a connective tissue that stores energy and protects organs.