Which of the Following Reflects a Hedge of Net Receivables

question 35

Multiple Choice

Which of the following reflects a hedge of net receivables in British pounds by a U.S. firm?

• A) purchase a currency put option in British pounds.
• B) sell pounds forward.
• C) borrow U.S. dollars, convert them to pounds, and invest them in a British pound deposit.
• D) A and B

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Definitions:

Asset Investment

The allocation of resources into physical or financial assets with the expectation of generating future returns.

Acquisitions

The process by which a company buys most or all of another firm's shares in order to take control.

Dividends In Arrears

Dividends on preferred stock that have been declared but not yet paid to shareholders.

Cumulative Preferred Stock

A type of preferred stock that accrues dividends if they are not paid in the year they are due, with these dividends being required to be paid out before any dividends can be paid to common stockholders.