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:

Unit Product Cost

The total cost associated with producing one unit of a product, including direct materials, direct labor, and allocated overhead.

Net Operating Income

A business's income after deducting operating costs, not including taxes or interest.

Break-even Points

The level of sales at which total revenues equal total costs, resulting in no profit or loss.

Break-even Sales

Break-even sales represent the amount of revenue needed to cover all fixed and variable costs, indicating the point at which a business neither makes a profit nor incurs a loss.