Assuming No Transaction Costs (I

question 26

Multiple Choice

Assuming no transaction costs (i.e., hedging is "free") , hedging currency exposures should ________ the variability of expected cash flows to a firm and at the same time, the expected value of the cash flows should ________.

• A) increase; not change
• B) decrease; not change
• C) not change; increase
• D) not change; not change

---

Definitions:

Assets Increase

A situation where the value or volume of a company's assets rises due to acquisition or appreciation.

Operating Activities

Transactions and events that relate to the primary operations of the company, including cash received from customers and cash paid for expenses.

Resources

Assets, materials, and inputs needed by businesses to produce goods or services.

Land

An asset represented by the earth's surface not depreciated over time, considered a fixed asset on a company's balance sheet without an expiration or useful life.