In each of the following cases, indicate whether it would be appropriate for an FI to buy

Question:

In each of the following cases, indicate whether it would be appropriate for an FI to buy or sell a forward contract to hedge the appropriate risk. (LG 24-1)

a. A commercial bank plans to issue CDs in three months.

b. An insurance company plans to buy bonds in two months.

c. A thrift is going to sell Treasury securities next month.

d. A U.S. bank lends to a French company; the loan is payable in euros.

e. A mutual fund plans to sell its holding of stock in a German company.

f. A finance company has assets with a duration of 6 years and liabilities with a duration of 13 years.

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