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1 ) Which of the following is not correct? Question options: Hedging makes sense for our company because it allows us to eliminate risks that
Which of the following is not correct? Question options: Hedging makes sense for our company because it allows us to eliminate risks that we do not wish to be exposed to such as currency risk. A CFO of a company that uses oil as an input believes that oil prices will decrease. It would be wrong for the CFO to try to profit from this expectation by shorting oil futures contracts. The benefit of hedging input price risks for a company should increase if the company is highly levered and close to financial distress. Our company chooses not to hedge foreign currency risk because we believe the dollar will appreciate and this appreciation will increase our profits. A US company expects to make a payment of million Euros in June, We are in October, Suppose the US company wishes to mitigate the exchange rate risk using domestic debt, foreign debt, and liquidity they don't want to use any future or forward What is the appropriate financial transaction? Question options: The US company needs to buy Euros today using dollars and hold cash or cash equivalent in Euros until June The US company needs to borrow in Euros, convert the proceeds into dollars, and hold dollars until The US company should borrow in dollars and conduct a stock repurchase. The US company needs to buy Euros today using dollars and convert the cash back into dollars before June
Which of the following is not correct?
Question options:
Hedging makes sense for our company because it allows us to eliminate risks that we do not wish to be exposed to such as currency risk.
A CFO of a company that uses oil as an input believes that oil prices will decrease. It would be wrong for the CFO to try to profit from this expectation by shorting oil futures contracts.
The benefit of hedging input price risks for a company should increase if the company is highly levered and close to financial distress.
Our company chooses not to hedge foreign currency risk because we believe the dollar will appreciate and this appreciation will increase our profits. A US company expects to make a payment of million Euros in June, We are in October, Suppose the US company wishes to mitigate the exchange rate risk using domestic debt, foreign debt, and liquidity they don't want to use any future or forward What is the appropriate financial transaction?
Question options:
The US company needs to buy Euros today using dollars and hold cash or cash equivalent in Euros until June
The US company needs to borrow in Euros, convert the proceeds into dollars, and hold dollars until
The US company should borrow in dollars and conduct a stock repurchase.
The US company needs to buy Euros today using dollars and convert the cash back into dollars before June
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