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

question 86

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 options

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Definitions:

Government Grant

Financial assistance provided by the government to entities, usually in the form of cash or tax breaks, with specific conditions for use.

Performance Obligation

A commitment in a contract to transfer a distinct good or service to a customer, which is a fundamental concept in revenue recognition.

AASB 141

An Australian Accounting Standard that deals with the agricultural activity, providing guidance on the accounting for agricultural produce and the land on which agriculture is conducted.

IAS 41

An International Accounting Standard that provides the accounting treatment for agricultural activity, including the recognition and measurement of biological assets and agricultural produce.