If an MNC Uses a Long-Term Forward Contract to Hedge

question 43

True/False

If an MNC uses a long-term forward contract to hedge the exchange rate risk associated with a bond denominated in euros, it would sell euros forward.

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Definitions:

Inelastic

A characteristic of goods whose demand does not change significantly when the price of the good changes.

Prices

The amount of money required to purchase goods or services, often determined by factors such as supply and demand.

Maximizing Utility

The process by which individuals allocate their resources to obtain the highest possible satisfaction from their consumption.

Marginal Utility

The change in satisfaction or usefulness obtained by consuming one additional unit of a good or service.