A Balance Sheet Hedge Requires That the Amount of Exposed

question 34

Multiple Choice

A balance sheet hedge requires that the amount of exposed foreign currency assets and liabilities:

• A) have a 2:1 ratio of assets to liabilities.
• B) have a 2:1 ratio of liabilities to assets.
• C) have a 2:1 ratio of liabilities to equity.
• D) be equal.

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Definitions:

Accounts Receivable

The amount of money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Credit Card Expense

Expenses incurred by using a credit card, typically involving interest charges and other fees.

Administrative Expense

Costs related to the general operation and administration of a business, including salaries of executive staff, office supplies, and utilities, but not directly tied to production or sales.

Promissory Note

A financial instrument in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand.