Consider a Simple Exchange Risk Hedging Strategy in Which the U.S

question 36

Multiple Choice

Consider a simple exchange risk hedging strategy in which the U.S. dollar based investor sells the expected foreign currency proceeds of a risky investment forward. Although the expected foreign investment proceeds will be converted into U.S. dollars at the known forward exchange rate under this strategy, the unexpected foreign investment proceeds

• A)will have to be converted into U.S. dollars at the uncertain forward spot exchange rate.
• B)will have to be converted into U.S. dollars at the uncertain future spot exchange rate.
• C)will have to be converted into U.S. dollars at the uncertain swap exchange rate.
• D)none of the above

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