An Example of an Operational Hedging Strategy Against Foreign Exchange

question 38

Multiple Choice

An example of an operational hedging strategy against foreign exchange risk is ________.

• A) using a forward contract to establish a fixed exchange rate for future transactions
• B) using local debt to balance local assets
• C) using a foreign currency option to ensure access to foreign currency at a fixed exchange rate for a specific period of time
• D) not using leads and lags for intercompany payments

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Definitions:

Endodermal Cells

Cells that make up the endoderm, the innermost layer of cells or tissue of an embryo in early development, which gives rise to the lining of the digestive and respiratory systems.

Lipid

A group of naturally occurring molecules including fats, oils, and waxes that are insoluble in water but soluble in nonpolar solvents.

Mycorrhizal Fungi

Fungi that form symbiotic associations with plant roots, aiding in nutrient absorption while receiving carbohydrates in return.

Parasitic Relationship

A type of interaction between species where the parasite benefits at the expense of the host, often causing harm.