Hedging with Currency Options Involves a Commitment by a Firm

question 12

True/False

Hedging with currency options involves a commitment by a firm to buy currency at a fixed rate.

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Definitions:

Nominal Interest Rate

Nominal interest rate is the stated or face interest rate on a loan or financial product, not adjusted for inflation, representing the actual percentage charged on the principal amount.

Expected Rate

The anticipated return on an investment, often based on historical performance and future projections.

Inflation

The inflationary pace at which prices for all goods and services mount, lessening purchase value.

Nominal Interest Rate

The interest rate before adjustments for inflation, representing the rate of interest charged by banks or paid on investments.