Consider These Five Statements

question 76

Multiple Choice

Consider these five statements:
i.If an Australian business decides to hedge a USD receivable at time t + 3,it would hedge through a forward contract in which it sells the AUD forward for t + 3.
ii.An Australian exporter with a USD receivable would be hedging through a money market hedge if it borrows USD today and repays the loan on the day on which the USDs are received from the payments of the export account receivable.
iii.If an Australian company borrows through an offshore sale of AUD-denominated bonds in the eurobond market,it is not exposed to FX risk.
iv.'Internal' hedging techniques may save a company the costs incurred in using 'market-based' hedging techniques,but they have recognisable costs as well.
v.A net payable in one currency and a net payable in another currency is a relatively low-risk set of exposures if the amounts and timing are identical,and the correlation coefficient between the two currencies is -0.99.
Which of the following are correct?

• A) i, ii, iii and iv are true
• B) ii, iii, iv and v are true
• C) ii, iii, and iv are true
• D) ii, iii and v are true

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Definitions:

Balancing the Budget

The process of adjusting income and expenditure so that they equal each other, resulting in no deficit or surplus.

Classical Economists

Economists from the 18th and 19th centuries who advocated for free markets, minimal government intervention, and believed in the theory of self-regulating economies.

Quantity of Money

The total amount of money in circulation or in existence within an economy at a given time.

Interest Rate

The price, in terms of a percentage of the principal, a borrower incurs from a lender to utilize assets.