Question

In: Finance

Forward contracts may reduce translation exposure at the expense of increasing transaction exposure, while they are...

Forward contracts may reduce translation exposure at the expense of increasing transaction exposure, while they are sometimes used to hedge translation exposure.

True or False

Solutions

Expert Solution

The given statement is TRUE as forward contract may be reducing translation exposure at the expense of increasing the transaction exposure as whenever we will be using the forward contracts then we will be exposing ourselves to the transaction risk and it can help in hedging risk related to multinational parent and subsidiary even though they are only used for hedging translation risk sometimes

The given statement is TRUE.

jeff jeffy answered 2 years ago
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