Multiple Choice
A U.S.FI wishes to hedge a €10,000,000 loan using euro currency futures.Each euro futures contract is for 125,000 euros,and the hedge ratio is 1.40.The loan is payable in one year in euros.
What type of currency hedge is necessary to protect the FI from exchange rate risk?
A) Buy € currency futures.
B) Sell € currency futures.
C) Finance the loan with € deposits.
D) Finance the loan with Eurodollar deposits.
Correct Answer:
Verified
Correct Answer:
Verified
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