Question
ENCANA INC, A CANADIAN FIRM HAS A USD PAYABLE WHICH IT HEDGES USING A FORWARD MARKET CONTRACT. THE CANADIAN DOLLAR IS QUOTED DIRECTLY. WHICH OF
ENCANA INC, A CANADIAN FIRM HAS A USD PAYABLE WHICH IT HEDGES USING A FORWARD MARKET CONTRACT. THE CANADIAN DOLLAR IS QUOTED DIRECTLY. WHICH OF THE FOLLOWING STATEMENTS IS TRUE?
Select one:
a. NEED MORE INFORMATION.
b. IF THE SPOT RATE IS LESS THAN THE FORWARD RATE AT MATURITY, ENCANA IS BETTER OFF WITH THE HEDGE THAN WITHOUT THE HEDGE.
c. IF THE SPOT RATE IS EQUAL TO THE FORWARD AT MATURITY, ENCANA IS BETTER OFF WITH THE HEDGE THAN WITHOUT THE HEDGE.
d. IF THE SPOT RATE IS GREATER THAN THE FORWARD RATE AT MATURITY, ENCANA IS BETTER OFF WITH THE HEDGE THAN WITHOUT THE HEDGE.
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Globalization Gating And Risk Finance
Authors: Unurjargal Nyambuu, Charles S. Tapiero
1st Edition
1119252652, 978-1119252658
