Using an FX Swap to Hedge a Foreign Currency Loan

question 23

Multiple Choice

Using an FX swap to hedge a foreign currency loan:

• A)locks-in the foreign interest rate as the effective cost of funds
• B)ensures that the domestic hedged amount will repay the foreign debt
• C)will always result in a better outcome than not hedging a foreign loan
• D)is motivated by the desire for protection from a foreign currency depreciation.
• E)All of these are correct.

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