A Corporation That Uses a Strategy of Hedging All Contracts

question 76

Multiple Choice

A corporation that uses a strategy of hedging all contracts specifying a foreign currency (i.e.foreign accounts receivable and foreign accounts payable) :

• A)Will always be better off than if the contracts were not hedged.
• B)Recognizes a net loss if the foreign exchange rate increases.
• C)Avoids net losses from fluctuations in foreign exchange rates.
• D)Recognizes a net gain if the foreign exchange rate increases.

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Definitions:

Worldwide Output

Worldwide output refers to the total production of goods and services by all countries around the globe.

Migration

The movement of people from one place to another with the intention of settling, permanently or temporarily, in a new location.

Domestic Output

The total value of goods and services produced within a country's borders in a given time period.

Wage Rates

The amount of money paid to an employee per unit of time (e.g., hour, day) or for a specific quantity of work done.