Which of the following refers to the money market hedge of a company’s payables (receivables)? 1. A company sells (buys) its foreign currency receivables (payables) forward to eliminate its exchange risk exposure. 2. A company borrows (or lends) in foreign currency to hedge its foreign currency receivables (payables), thereby matching its assets and liabilities in the same currency. 3. A company buys a currency at the place where it is priced cheaper and immediately sells it at the place where it is priced higher. 4. A company buys a foreign currency call (put) option to hedge its foreign currency payables (receivables).

Which of the following refers to the money market hedge of a company’s payables (receivables)? 1. A company sells (buys) its foreign currency receivables (payables) forward to eliminate its exchange risk exposure. 2. A company borrows (or lends) in foreign currency to hedge its foreign currency receivables (payables), thereby matching its assets and liabilities in the same currency. 3. A company buys a currency at the place where it is priced cheaper and immediately sells it at the place where it is priced higher. 4. A company buys a foreign currency call (put) option to hedge its foreign currency payables (receivables).

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 2QA

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