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Assume zero transaction costs. If the 90-day forward rate of the euro is an accurate estimate of the spot rate 90 days from now, then the real cost of hedging payables will be:

• positive.

• negative.

• positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount.

• zero.

Assume zero transaction costs. If the 180-day forward rate overestimates the spot rate 180 days from now, then the real cost of hedging payables will be:

• positive.

• negative.

• positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount.

• zero.

Using the information provided, what will be the approximate value of SF600,000 exports in 1 year in U.S. dollars with a forward hedge?

• $234,000.

• $238,584.

• $240,000.

• $236,127.

Using a money market hedge for NZ$600,000 receivables, what is the approximate value in USD?

• $238,584.

• $240,000.

• $234,000.

• $236,127.

An example of cross-hedging is:

• matching payables in one currency to receivables in a correlated currency.

• using forwards to sell currencies you will receive.

• using forwards to buy currencies you will receive.

• B and C.

Which reflects a hedge of net receivables in British pounds?

• Purchase a currency put option.

• Sell pounds forward.

• Borrow USD, convert to pounds, and invest.

• A and B.

Which reflects a hedge of net payables in British pounds?

• Purchase a currency put option.

• Sell pounds forward.

• Sell a currency call option.

• Borrow USD, convert to pounds, and invest.

To lock in the maximum payment for euro payables while benefiting from euro depreciation, the best hedge is:

• money market hedge.

• purchasing euro put options.

• forward purchase of euros.

• purchasing euro call options.

To lock in a minimum rate for yen receivables while benefiting from yen appreciation, the best hedge is:

• money market hedge.

• forward sale of yen.

• purchasing yen call options.

• purchasing yen put options.

The real cost of hedging payables with a forward contract equals:

• nominal cost of hedging minus nominal cost of not hedging.

• nominal cost of not hedging minus nominal cost of hedging.

• nominal cost of hedging divided by nominal cost of not hedging.

• nominal cost of not hedging divided by nominal cost of hedging.