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.

---

Definitions:

Confidence

The degree of certainty or trust in a statistical or experimental result, often expressed as a confidence interval or level.

Test Statistic

A calculated value from sample data used to determine whether to reject the null hypothesis within the framework of a statistical test.

Obtained Value

The actual value calculated from a statistical test's data, used to interpret the result by comparison with critical values of the distribution.

Statistical Procedure

A sequence of operations performed on data to analyze relationships, test hypotheses, and estimate probabilities.