What Is the Primary Difference Between a Cash Flow Hedge

question 18

Multiple Choice

What is the primary difference between a cash flow hedge and a fair value hedge?

• A) The fair value hedge must completely offset the variability in the cash flow from the foreign currency receivable or payable.
• B) The cash flow hedge can only be used to offset potential foreign currency losses on accounts receivable.
• C) The cash flow hedge must completely offset the variability in cash flow from the foreign currency receivable or payable.
• D) The fair value hedge can only be used to offset the variability in cash flow from long-term fixed assets related to foreign currency fluctuations.

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Definitions:

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A statistical procedure for investigating the effect of two categorical predictors on a continuous outcome.

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A statistical test used to compare the means of three or more independent groups to determine if there are any statistically significant differences between the groups' means.