An MNE Has a Contract for a Relatively Predictable Long-Term

question 26

Multiple Choice

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by paying for imports from Canada in Japanese yen. This hedging strategy is known as:

• A) a natural hedge.
• B) currency-switching.
• C) matching.
• D) diversification.

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Definitions:

Dollar-Value LIFO

An inventory valuation method that uses the last-in, first-out (LIFO) principle, but accounts for changes in inventory value due to inflation by measuring inventory in dollar amounts rather than units.

Year-End Price

The market price of a stock or any other security on the last trading day of the year.

Price Index

A measure that examines the average change in prices of goods and services over time in an economy.

Dollar-Value LIFO

An inventory valuation method that uses the last-in-first-out (LIFO) principle, adjusted for changes in the dollar's value, to account for inflation.