Which of the Following Is Not a Criterion That Must

question 16

Multiple Choice

Which of the following is not a criterion that must exist for hedge accounting to function:

• A) Item to be hedge exposes the enterprise to price, currency, or interest rate risk.
• B) The hedge position reduces the exposure.
• C) The hedge position is designated as a hedge.
• D) The enterprise would suffer a loss in the absence of the hedge.

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Definitions:

Expected Rate

In finance, it typically refers to the predicted average rate of return on an investment over a specified period.

Standard Deviation

A statistical measure that quantifies the amount of variability or dispersion of a set of data values around the mean (average).

Risk-Free Asset

A financial instrument that is considered to have no risk of financial loss and typically features a guaranteed rate of return, such as government bonds.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, showing how much each value in the set differs from the mean.