To be regarded as 'highly effective' in achieving offsetting changes in fair value or cash flows, actual hedge results must be in the range:

A) 70% - 100%;
B) 80% - 125%;
C) 90% - 100%;
D) 20% - 50%.

Question

To be regarded as 'highly effective' in achieving offsetting changes in fair value or cash flows, actual hedge results must be in the range:

A) 70% - 100%;
B) 80% - 125%;
C) 90% - 100%;
D) 20% - 50%.

Quizplus · Accepted Answer

For a hedge to be considered highly effective, the actual results must achieve offsetting changes in fair value or cash flows within the range of 80% to 125%. This criterion ensures that the hedge is effectively mitigating the risk it was designed to hedge.

To Be Regarded as 'Highly Effective' in Achieving Offsetting Changes