Question

In: Accounting

All of the following are management tools available for a U.S. company to hedge its exposures...

All of the following are management tools available for a U.S. company to hedge its exposures in foreign current transactions except:

A.

Foreign currency futures

B.

Foreign currency forward contracts

C.

Intercompany financing arrangements including intercompany transactions

D. Foreign currency options

Solutions

Expert Solution

The Correct option is ''C'' all otther options currency futures , forieign currency forwards contracts , foreign currency options are part of hedging tools. Currency futures are contrats are contracts which are related with exchange of securities on a specified date and on a specified rate. These contracts are regulated by exchanges. So These contracts are helpful in hedging the current tranasactions exposure. foreign currency forwards are different from forein currency futures they are not regulated by any exchanges. They do not require upfront payment. These are dealt on over the counter and are exchanged on a customizable rate not on a specilfied rate in future. Other than that foreign currncy options is also a mangement tool which will hedge the exposure foreign currency options are the option which is given to buyer to not to buy certain securitires to buy on specified rate or at specififed rate. these contracts give the right to the buyer to buy the security but it is not an obligation for buyer he can use this option by giving some amount of premium to the seller of the securtity at the time of contract.

Please ?? If you find it helpful.

ekkarill92 answered 2 years ago
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