The Degree to Which Changes in the Fair Value of a Forward

question 4

Multiple Choice

The degree to which changes in the fair value of a forward contract offset changes in the fair value or cash flows of a hedged item, describes:

• A) transaction exposure.
• B) hedge ineffectiveness.
• C) hedge effectiveness.
• D) transaction variability.

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Definitions:

Cash

Money in the form of currency, which includes bills, coins, and money in bank accounts that is available for immediate use.

Current Liabilities

Short-term financial obligations that are due within one year or within a normal operational cycle.

Accrued Expenses

Expenses that have occurred but have not yet been paid or recorded in the company's ledger.

Unearned Service Revenue

Income received by a company for services that have not yet been performed, considered a liability until the service is provided.