FIN 355 Quiz 9 ANSWER
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Question 1
2 out of 2 points
Correct
Which of the following statements about a money market hedge is not true?
Answer
Selected Answer:
It is usually riskier than leaving foreign currency exposure uncovered
Correct Answer:
It is usually riskier than leaving foreign currency exposure uncovered
Question 2
2 out of 2 points
Correct
Suppose that a firm is to receive a foreign currency payment from a customer in the future. The firm partially hedges its exposure with currency futures (the forward exchange rate equals today’s spot exchange rate). If the foreign currency depreciates against the U.S. Dollar by the time the payment is due, the firm’s dollar receipts will be _______.
Answer
Selected Answer:
lower than under a full futures hedge but higher than under an unhedged position
Correct Answer:
lower than under a full futures hedge but higher than under an unhedged position
Question 3
2 out of 2 points
Correct
Trading foreign currency futures to hedge an international transaction _______.
Answer
Selected Answer:
allows to lock in the exchange rate at the time when the payment is to be made
Correct Answer:
allows to lock in the exchange rate at the time when the payment is to be made