Ideally, hedging transactions are:
A) Negative NPV transactions
B) Positive NPV transactions
C) Zero-NPV transactions
D) None of the above

Question

Quizplus · Accepted Answer

Ideally, hedging transactions are zero-NPV transactions as their main purpose is to minimize or eliminate risk rather than making a profit or incurring a loss. A zero-NPV transaction means that the present value of the cash inflows and outflows from the transaction is zero, resulting in no gain or loss. So, a hedging transaction with a zero-NPV is the best choice.

Ideally, Hedging Transactions Are