Which one of the following is NOT a reason for using hedges such as a synthetic forward?
A) In some currency markets, forward contracts may not be available, but they can be manufactured using a money market hedge.
B) Individual companies are not able to borrow and lend at the interest rates available in the interbank market.
C) When time horizons are long, forward contracts can be expensive as the bid-ask spread widens substantially.
D) It may be unfavorable to consider borrowing and lending to hedge one's currency risk.
Answer: D
You might also like to view...
A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the initial value method. Why might the company have made this decision?
A. It is a relatively easy method to apply. B. GAAP now requires the use of this particular method for internal reporting purposes. C. Operating results appearing on the parent's financial records reflect consolidated totals. D. Consolidation is not required when the parent uses the initial value method.
___________, often driven by external groups and concerned citizens, has resulted in a greater awareness and understanding of the environmental challenge which we are now facing.
A. Regulatory compliance B. Societal pressure C. Eco-management D. Environmental sustainability initiatives E. Environmental responsibilities