WEEK-3 CH.008-QUIZ.docx - 1 If you have a long position in a foreign currency you can hedge with a short position in a currency forward contract 2 If

WEEK-3 CH.008-QUIZ.docx - 1 If you have a long position in...

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1.If you have a long position in a foreign currency, you can hedge with a short position in a currency forward contract.2.If you own a foreign currency denominated bond, you can hedge witha swap contract where pay the cash flows of the bond in exchange for dollars.3.With any hedge,your losses on one side should about equal your gains on the other side.4.A CFO should be least worried about translation exposure.5.Suppose that Boeing Corporation exported a Boeing 747 to Lufthansa and billed €10 million payable in one year. The money market interest rates and foreign exchange rates are given as follows: 6.A Japanese exporter has a €1,000,000 receivable due inone year. Spot and forward exchange rate data is given: 7.Your firm has a British customer that is willing to place a $1 million order (with payment due in 6 months), but insists upon paying in pounds instead ofdollars.

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