A U.S. bank has £700 million in loans it has made to corporate customers and it has £850 million in deposits. The net foreign exchange exposure from these accounts may be hedged by selling 150 million pounds forward.

Question

Quizplus · Accepted Answer

The given information does not provide enough context to determine if selling 150 million pounds forward will effectively hedge the net foreign exchange exposure. Additional information such as the currency of the loans and deposits and the expected exchange rate movements would be needed to make this determination.

A US Bank Has £700 Million in Loans It Has Made