The Real Cost of Hedging Payables with a Forward Contract

question 54

Multiple Choice

The real cost of hedging payables with a forward contract equals:

• A) the nominal cost of hedging minus the nominal cost of not hedging.
• B) the nominal cost of not hedging minus the nominal cost of hedging.
• C) the nominal cost of hedging divided by the nominal cost of not hedging.
• D) the nominal cost of not hedging divided by the nominal cost of hedging.

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Definitions:

Performance Threat

A situation in which something is obviously wrong or has the potential to go wrong.

Performance Deficiency

A situation where an individual's work performance falls below the required standard or expectation.

Actual Performance

Refers to the real, observed output, results, or accomplishments of an individual or organization, as opposed to expected or theoretical performance.

Input Standards

Benchmark or criteria used to measure the quality, quantity, or performance of inputs used in a process.