Which One of the Following Is NOT a Reason for Using

question 1

Multiple Choice

Which one of the following is NOT a reason for using hedges such as a synthetic forward?

• A) In some currency markets, forward contracts may not be available, but they can be manufactured using a money market hedge.
• B) Individual companies are not able to borrow and lend at the interest rates available in the interbank market.
• C) When time horizons are long, forward contracts can be expensive as the bid-ask spread widens substantially.
• D) It may be unfavorable to consider borrowing and lending to hedge one's currency risk.

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Definitions:

Total Float

The total amount of time that a project task can be delayed without causing a delay to subsequent tasks or the project's final deadline.

Cheques

Written, dated, and signed instruments that direct a bank to pay a specific sum of money to the bearer from the drawer's account.

Clearing Times

The time period required for the settlement of financial transactions, from the moment of initiation to finalization.