The Following Comments Might Be Made About Australian Businesses Involved

question 10

Multiple Choice

The following comments might be made about Australian businesses involved in gold mining and similar operations (note that Gold is generally traded in US dollars) :
i.They do not need to engage in hedging of foreign currency transactions because
Gold prices are always set in US dollars
ii.There is no benefit in engaging in hedging of foreign currency transactions because
They cannot significantly influence the price of their product
iii.Hedging of foreign currency transactions would diminish or remove any uncertainty
About the effects of changes in exchange rates
iv.Hedging of foreign currency transactions could cause them to report lower profits
(or larger losses) than if they did not engage in hedging

• A) Both (i) and (iii) are correct
• B) Both (ii) and (iv) are correct
• C) Both (i) and (iv) are correct
• D) Both (iii) and (iv) are correct

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