1. Your company will receive C$600 000 in 90 days. The 90day forward rate in the Canadiandollar is $.80. If you use a forward hedge you will-a. receive $750 000 today.b. receive $750 000 in 90 days.c. pay $750 000 in 90 days.d. receive $480 000 today.e. receive $480 000 in 90 days2. With regard to hedging translation exposure translation losses ________; and gains onforward contracts used to hedge translation exposure _______.a. are not tax deductible; are taxedb. are tax deductible; are taxedc. are not tax deductible; are not taxedd. are tax deductible; are not taxed3. An example of cross-hedging is-a. find two currencies that are highly positively correlated; match the payables of the onecurrency to the receivables of the other currency.b. use the forward market to sell forward whatever currencies you will receive.c. use the forward market to buy forward whatever currencies you will receive.d. b and c.4. If interest rate parity exists and transaction costs do not exist the money market hedgewill yield the same result as the _______ hedge.a. put optionb. forwardc. call optiond. none of the above5. Use the following information to calculate the dollar cost of using a money market hedge tohedge 200 000 pounds of payables due in 180 days. Assume the firm has no excess cash.Assume the spot rate of the pound is $2.02 the 180-day forward rate is $2.00. The Britishinterest rate is 5% and the U.S. interest rate is 4% over the 180-day period.a. $391 210.b. $396 190.c. $388 210.d. $384 761.e. none of the above.
Your company will receive C$600 000 in 90 days.
by | Sep 6, 2025 | Statistics
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