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

question 44

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 Japan?

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

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Definitions:

Recessionary Period

A time characterized by economic decline across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Inflation

A general increase in prices and fall in the purchasing value of money.

Inventories

Producers’ stocks of finished and in-process goods.

Economic Fluctuations

Variations in the economic activity of a country over time, including periods of growth (expansions) and decline (recessions).