An Example of Hedging to Control Currency Exchange Rate Risk

question 37

Multiple Choice

An example of hedging to control currency exchange rate risk is:

• A)A wine distributor currently importing wine made from the 2010 vintage.
• B)A wine distributor paying for wine today that will be delivered in three years.
• C)A wine distributor that visits the vineyard where wine is made before buying the vintage.
• D)A wine distributor that settles all of its bills with euros.

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Definitions:

Good

A Good is a tangible product that satisfies human wants or needs.

Kosher Foods

Foods that comply with a strict set of dietary rules in Judaism.

Elastic

A term describing a situation where the demand or supply of a good or service changes significantly when its price changes.

Higher Taxes

Increased rates or amounts of taxes imposed by governments on individuals, corporations, or transactions.