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The Rich Company seeks to limit its potential exposure from future variable - interest debt by engaging in a cash flow hedge. Thus, it seeks
The Rich Company seeks to limit its potential exposure from future variableinterest debt by
engaging in a cash flow hedge. Thus, it seeks to acquire a financial instrument that varies in price in
opposition to Ricks expected payments on this debt instrument. However, it is unsure of the
effectiveness of this hedging instrumentsince it is unsure of the expected timing of such transactions.
Can Rich classify this proposed financial instrument as a cash flow or other hedge?
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