Which of the Following Is NOT Cited as a Good

question 23

Multiple Choice

Which of the following is NOT cited as a good reason for hedging currency exposures?

• A) Reduced risk of future cash flows is a good planning tool.
• B) Reduced risk of future cash flows reduces the probability that the firm may not meet required cash flows.
• C) Currency risk management increases the expected cash flows to the firm.
• D) Management is in a better position to assess firm currency risk than individual investors.

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Definitions:

Annuity Due

A type of annuity in which payments are made at the beginning of each period, typically used in leases and rental agreements, resulting in higher present value compared to ordinary annuities.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, frequently used in the evaluation of investment opportunities.

Investment

An asset or item acquired with the goal of generating income or appreciation in value.

Outstanding Balance

The amount of money owed on a loan or credit line that remains to be paid off.