An Anticipatory Hedge Is One in Which

question 54

Multiple Choice

An anticipatory hedge is one in which

• A)the basis is expected to fall
• B)the hedger expects to make a profit on the futures
• C)the spot position will be taken in the future
• D)all of the above
• E)none of the above

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Definitions:

Japanese Yen

The official currency of Japan, often symbolized as ¥, used in both domestic and international financial transactions.

Interest Rate Parity

A theory stating that the difference in interest rates between two countries is equal to the difference in the forward exchange rate and the spot exchange rate.

Covered Interest Arbitrage

An investment strategy where an investor uses the difference in interest rates between two countries to profit from currency exchange rate changes, using a forward contract to hedge exchange rate risk.

Profit or Loss

The difference between total revenues and total expenses of a business over a specific period of time.