XYZ Corporation, located in the United States, has an accounts payable obligation of ¥750 million payable in one year to a bank in Tokyo. Which of the following is NOT part of a money market hedge?

Question

Quizplus · Accepted Answer

Buying the ¥750 million at the forward exchange rate is a part of a money market hedge. Therefore, the option that is not a part of the money market hedge is A. The other options - finding the present value of ¥750 million at the Japanese interest rate, buying that much yen at the spot exchange rate, and investing in risk-free Japanese securities with the same maturity as the accounts payable obligation - are all part of a money market hedge.

XYZ Corporation, Located in the United States, Has an Accounts