When There Is a Full Forward Cover with the Spot

question 4

Multiple Choice

When there is a full forward cover with the spot rate equal to the forward rate all of the following are true EXCEPT:

• A) The hedge is asymmetric.
• B) There is no uncovered exposure remaining.
• C) The total position is a perfect hedge.
• D) The currency hedge ratio is equal to 1.

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Definitions:

Operating Cash Flow

Measures the cash generated from a company's normal business operations, indicating whether a company can maintain or grow its operations without new financing.

Net Working Capital

The difference between a company's current assets (like cash, inventory, receivables) and its current liabilities (like payables), indicating short-term financial health and operational efficiency.

Cash Flow From Assets

The total amount of money being transferred in and out of a business, particularly from operational, investing, and financing activities.

Shareholders' Equity

The ownership interest of shareholders in a company's assets, once all liabilities have been subtracted.