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

question 40

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:

Central Limit Theorem

A theory stating that when samples are large enough, their mean will be approximately normally distributed, regardless of the population's distribution.

Standard Error

A statistical measure that quantifies the variability or dispersion of a sample statistic from the population parameter it estimates.

Population Distribution

A term that describes how the values of a variable are distributed across an entire population.

Sampling Distribution

The probability distribution of a given statistic based on a random sample.