An Advantage of Using Options to Hedge Is That the MNC

question 13

True/False

An advantage of using options to hedge is that the MNC can let the option expire. However, a disadvantage of using options is that a premium must be paid for it.

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Definitions:

Indirect Method

A way of calculating cash flows from operations by starting with net income and adjusting for changes in non-cash accounts.

Investment Banks

Financial institutions that assist individuals, corporations, and governments in raising capital, advising on mergers and acquisitions, and providing other financial services.

Certificate of Deposit

A savings certificate with a fixed maturity date, specified fixed interest rate, and can be issued in any denomination aside from minimum investment requirements.

Financial Intermediary

An institution that facilitates the channeling of funds between lenders and borrowers by intermediating between them.