Common sense tells us that a company should hedge an exposure if, and only if, the costs of executing the hedge are outweighed by the expected benefits. Critically discuss this statement with reference to the advantages and disadvantages of risk management and to key strategies developed and used for external management of interest rate risk and exchange rate risk

Common sense tells us that a company should hedge an exposure if, and only if, the costs of executing the hedge are outweighed by the expected benefits. Critically discuss this statement with reference to the advantages and disadvantages of risk management and to key strategies developed and used for extermal management of interest rate risk and exchange rate risk d) (10 marks) (Total: 20 marks) End of Examination Present Value and Annuity Tables are on the following pages Page 7 of 9 Common sense tells us that a company should hedge an exposure if, and only if, the costs of executing the hedge are outweighed by the expected benefits. Critically discuss this statement with reference to the advantages and disadvantages of risk management and to key strategies developed and used for extermal management of interest rate risk and exchange rate risk d) (10 marks) (Total: 20 marks) End of Examination Present Value and Annuity Tables are on the following pages Page 7 of 9