One of the Drawbacks of Using Forward Contracts to Hedge

question 57

Multiple Choice

One of the drawbacks of using forward contracts to hedge foreign exchange risk from payables is that the:

• A) transaction costs in the forward market are high.
• B) forward rates are always lower than spot rates.
• C) hedged currency could appreciate during the period.
• D) hedged currency could depreciate during the period.

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Definitions:

Electromagnetic Interference

Disturbance that affects an electrical circuit due to electromagnetic induction or radiation emitted from an external source.

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