If a Firm Is Hedging Payables with Futures Contracts, It

question 46

True/False

If a firm is hedging payables with futures contracts, it may end up paying more for the payable than it would have had it remained unhedged if the foreign currency depreciates.

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and entitling the holder to a share of the company's success through dividends and/or capital appreciation.

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders, used for reinvestment in the business or paying off debt.

Stock Dividend

A distribution of additional shares of a company's stock to its shareholders at no extra cost.