Which of the Following Provides the Best Hedge Against Exchange

question 35

Multiple Choice

Which of the following provides the best hedge against exchange variations in the value of a stream of income in a foreign currency where the payments are expected to occur in equal amounts over a period of five years?

• A) Borrowing in the foreign currency with repayment due at the end of the five years.
• B) Borrowing in Canadian dollars with repayment due at the end of the five years.
• C) Borrowing in the foreign currency with annual repayments equal to the expected annual revenue cash flows.
• D) Borrowing in Canadian dollars with annual repayments equal to the expected annual revenue cash flows.

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