Which of the Following List Would Not Be Effective as a Hedge

question 16

Multiple Choice

Which of the following list would not be effective as a hedge for a Canadian company with a large number of transactions in Denmark?

• A)Danish krone held by a Canadian bank.
• B)A forward contract for the purchase of Danish krone.
• C)A forward contract for the sale of Danish krone.
• D)Canadian funds held by a Danish bank.

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Definitions:

Random Elements

Unpredictable factors that can affect outcomes in various systems or processes, often incorporated into models and decision-making to account for uncertainty.

Policy Changes

Refers to modifications or adjustments made to existing rules, regulations, or guidelines within an organization, institution, or government.

Real-Life System

Refers to complex, operational systems that function in the real world, often encompassing human, technological, and environmental components.

Time-Consuming

Activities or processes that require a significant amount of time to complete, often implying inefficiency or labor intensity.