To Hedge a Payable Position in a Foreign Currency with a Money

question 21

True/False

To hedge a payable position in a foreign currency with a money market hedge, the MNC would borrow the foreign currency, convert it to dollars, and invest that amount in the U.S. until the payable is due.

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Definitions:

Outside Supplier

An external entity that provides goods or services to a company, usually part of the supply chain.

Transfer Price

The cost applied to products or services exchanged between units or affiliates within the same corporation.

Variable Expenses

Costs that change in proportion to the activity or volume of production in a business.

Selling Costs

Expenses incurred directly from the sale of a product or service, including marketing, advertising, and sales personnel expenses.