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.
E) Either B or D.
Correct Answer:
Verified
Correct Answer:
Verified
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