A Firm Intends to Hedge Against Exchange Loss,a Large Future

question 28

Multiple Choice

A firm intends to hedge against exchange loss,a large future payment that must be made in a foreign currency.Which of the following identifies the cost of such a hedge?

• A) Difference between expected and current spot rates
• B) Difference between expected and current forward rates
• C) Difference between the forward premium and the forward discount
• D) Difference between the forward rate and the expected future spot rate

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