A Corporation That Uses a Strategy of Hedging All Contracts

question 76

Multiple Choice

A corporation that uses a strategy of hedging all contracts specifying a foreign currency (i.e.foreign accounts receivable and foreign accounts payable) :

• A)Will always be better off than if the contracts were not hedged.
• B)Recognizes a net loss if the foreign exchange rate increases.
• C)Avoids net losses from fluctuations in foreign exchange rates.
• D)Recognizes a net gain if the foreign exchange rate increases.

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Definitions:

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