Maturities of Hedging Instruments and the Maturity of Currency Exposures

question 13

Multiple Choice

Maturities of hedging instruments and the maturity of currency exposures rarely are the same because:

• A)maturities of hedging instruments are standardized and set by the exchanges where they are traded.
• B)maturities of hedging instruments are not fixed and can change as circumstances change.
• C)maturities of currency exposures are not fixed and can change as circumstances change.
• D)the maturity of hedging instruments is not known when the hedging instruments are acquired.

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Definitions:

Tax Incidence

The study of who ultimately bears the burden of a tax, which can differ from who the tax is initially levied upon.

Tax Burden

The measure of taxes that an individual or business must pay out of their income or profit.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare among entities in the market.

Imported Wine

Wine that is produced in one country and then shipped to and sold in another country.