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Which of the following best describes a limitation of hedging payables? O Hedging payables for an uncertain amount of currency can lead to unforeseen losses.
Which of the following best describes a limitation of hedging payables? O Hedging payables for an uncertain amount of currency can lead to unforeseen losses. The results of a money market hedge on payables are not known beforehand and are subject to high exchange rate risk. A currency call option on payables requires the MNC to purchase that currency The results of a forward hedge on payables are not known beforehand and are subject to high exchange rate risk, Consider Samuel Co., a U.S. based MNC that must pay 3 million Thai baht to a supplier in Thailand. The payment is due in 3 months, but Samal believes the baht will appreciate over those 3 months. Moreover, forward contracts and other hedging strategies are not available to the MNC However, since (hypothetically the Hungarian Forint is highly correlated with the Thai baht, the MNC purchases forint forward and plans toute thote forint to exchange for baht when the payable is due. This strategy is known as cross hedging Consider Samuel Co., a U. believes the baht will appr lagging However, since Chypothetid leading forint to exchange for baht Currency diversification by 3 million Thai baht to a supplier in Thailand. The payment is due in 3 months, but Samuel 5. Moreover, forward contracts and other hedging strategies are not available to the MNC is highly correlated with the Thai baht, the MNC purchases forint forward and plans to use those This strategy is known as
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