All of the Following Hedges Are Used for Future Purchase/sale

question 39

Multiple Choice

All of the following hedges are used for future purchase/sale transactions except

• A) Forward contracts used as a fair value hedge of a firm commitment.
• B) Options used as a fair value hedge of a firm commitment.
• C) Option contract cash flow hedge of a forecasted transaction.
• D) Forward contract cash flow hedges of a forecasted transaction.
• E) Forward contracts used to hedge a foreign currency denominated liability.

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Definitions:

Income

Financial gains obtained regularly as a result of working or investing.

Imputed Interest Rules

IRS rules that assign a market-rate interest value to certain transactions where no interest or an unrealistic amount of interest is charged.

Personal Residence

A dwelling where an individual lives for the majority of the tax year, which can include a house, apartment, trailer, or boat.

Sale of Property

The act of transferring ownership of real estate or personal property from one party to another for a price.