100%(1)1 out of 1 people found this document helpful
This preview shows page 2 - 5 out of 26 pages.
9) With any hedge,A.your losses on one side should about equal your gains on the other side.B.you should try to make money on both sides of the transaction; that way you make money coming and going.C.you should spend at least as much time working the hedge as working the underlying dealitself.D.you should agree to anything your banker puts in front of your face.10) With any successful hedge,11) The choice between a forward market hedge and a money market hedge often comes down to12) Since a corporation can hedge exchange rate exposure at low cost
13) A CFO should be least worried aboutA.transaction exposure.B.translation exposure.C.economic exposure.D.none of the options14) Exchange rate risk of a foreign currency payable is an example of15) A stock market investor would pay attention to16) 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:Assume that Boeing sells a currency forward contract of €10 million for delivery in one year, in exchange for a predetermined amount of U.S.dollars. Which of the following is/are true? On the maturity date of the contract Boeing will(i)have to deliver €10 million to the bank (the counter party of the forward contract).(ii)take delivery of $14.6 million(iii)have a zero net euro exposure(iv)have a profit, or a loss, depending on the future changes in the exchange rate, from this British sale.