What Is the Objective of a Cash Flow Hedge

question 127

Multiple Choice

What is the objective of a cash flow hedge?

• A)To offset the losses due to changes in the value of an asset or liability
• B)To reduce the risk associated with future cash flows
• C)To predict future cash flows
• D)To predict the value of an asset or minimize the value of a liability
• E)None of the options are correct

---

Definitions:

Hypergeometric Probability

The probability of a certain number of successes in draws from a finite population without replacement, where each draw can result in a success or a failure.

Continuous Probability

The probability of outcomes in a continuous range of values rather than discrete outcomes.

Hypergeometric Formula

A statistical formula used to calculate probabilities without replacement for finite populations.

Without Replacement

A sampling method where each selected unit is not returned to the population before the next draw.