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For an Investor Who Starts with Dollars and Wants to End

Question 3

Multiple Choice

For an investor who starts with dollars and wants to end up with dollars in the future, which of the following choices is an example that includes hedging?

A) Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to buy the foreign currency
B) Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to buy dollars
C) Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and then buy dollars at the future spot rate
D) Buy a dollar-denominated financial asset

Correct Answer: