A U.S.FI wishes to hedge a €10,000,000 loan using euro currency futures.Each euro futures contract is for 125,000 euros,and the hedge ratio is 1.40.The loan is payable in one year in euros.
What type of currency hedge is necessary to protect the FI from exchange rate risk?
A) Buy € currency futures.
B) Sell € currency futures.
C) Finance the loan with € deposits.
D) Finance the loan with Eurodollar deposits.
Correct Answer:
Verified
Q108: The average duration of the loans
Q109: A U.S.bank issues a 1-year,$1 million U.S.CD
Q110: The average duration of the loans
Q111: The average duration of the loans
Q114: A U.S.bank issues a 1-year,$1 million U.S.CD
Q115: The average duration of the loans
Q117: The average duration of the loans
Q118: Conyers Bank holds U.S.Treasury bonds with a
Q118: The average duration of the loans
Q125: A U.S.bank issues a 1-year, $1 million
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents