Chapter10 - Chapter Ten Foreign Exchange Futures Answers to...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter Ten Foreign Exchange Futures Answers to Problems and Questions 1. There is no single correct answer to this. Some research suggests that hedging foreign exchange risk in investment portfolios is not a good idea because it reduces the risk/return ratio of the portfolio. On the other hand, when a specific, unacceptable risk arises, you should seriously consider removing it. 2. It would give you greater flexibility, but it would also be more risky. By replacing the forward contract twice, you would not know in advance the precise price at which the currency transaction would occur. 3. a) A rise in inflation generally results in an increase in interest rates. b) Because the increase in inflation was the same in both countries, the relative exchange rates probably will not change. 4. Economic exposure measures the risk that the value of an investment will fall because of adverse foreign exchange movements. Accounting exposure deals with the consolidation of financial statements. 5. The forward market is not intended to be an opportunity for speculation or
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Chapter10 - Chapter Ten Foreign Exchange Futures Answers to...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online