Strategies to Counter Exchange Rate Risk Include All of the Following

question 51

Multiple Choice

Strategies to counter exchange rate risk include all of the following EXCEPT

• A) futures contracts.
• B) spot-market hedges.
• C) forward-market hedges.
• D) money-market hedges.

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Definitions:

Money Demand

The desired holding of financial assets in the form of money; it is often associated with the level of liquidity preference.

Real Interest Rate

The interest rate adjusted for inflation, representing the true cost of borrowing or real yield on investment.

Value of Money

The purchasing power of currency, indicating the amount of goods or services that one unit of money can buy, which fluctuates over time due to inflation or deflation.

Quantity Theory

A theory in economics that addresses the relationship between the amount of money in an economy and the level of economic activity, asserting that the general price level of goods and services is directly proportional to the amount of money in circulation.