After Assessing the Risk of the Various Exposures,a Company Decides

question 47

Multiple Choice

After assessing the risk of the various exposures,a company decides to take a money market hedge.The general principle of a money market hedge is to:

• A) transact in the money market of the country whose currency you are exposed to.
• B) borrow the home currency and deposit it in the foreign money market until the future date of the exposed transaction.
• C) take a position in the home money market today that establishes a future obligation that is the opposite of the exposed underlying transaction.
• D) none of the given choices are correct.

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Definitions:

Standard Materials Quantity

The estimated amount of materials expected to be used in the production of a product under normal operating conditions.

Board Feet

A unit of measure for lumber, representing a volume of 144 cubic inches, equivalent to a board that is one foot long, one foot wide, and one inch thick.

Quantity Variance

The difference between the actual quantity of materials or labor used in a process and the expected amount, which affects overall production costs.

Direct Materials

Raw materials that are directly traceable to the production of a specific good or service and are a significant portion of the production cost.