Which of the Following Hedging Strategies Would a Business Most

question 43

Multiple Choice

Which of the following hedging strategies would a business most likely use?

• A)An importer will want to hedge his foreign denominated accounts receivable and will purchase forward contracts to hedge an exposed net asset position.
• B)An importer will want to hedge his foreign denominated accounts payable and will purchase forward contracts to hedge an exposed net liability position.
• C)An exporter will want to hedge his foreign denominated accounts receivable and will purchase forward contracts to hedge an exposed net liability position.
• D)An exporter will want to hedge his foreign denominated accounts payable and will purchase forward contracts to hedge an exposed net liability position.

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Definitions:

Output Effect

The Output Effect describes how changes in price levels affect the quantity of goods and services produced in an economy, influencing overall economic output.

Substitute Resources

Alternative means or materials that can be used to achieve the same function or production goal in the absence of preferred resources.

Price of Capital

The cost of using capital assets for production, including interest rates on loans or opportunity costs of using own capital.

Wage Rate

The amount of money paid to an employee by an employer in exchange for work performed, typically expressed on an hourly, daily, or piecework basis.