From the perspective of Detroit Co., which has payables in Mexican pesos and receivables in Canadian dollars, hedging the payables would be most desirable if the expected real cost of hedging payables is ____, and hedging the receivables would be most desirable if the expected real cost of hedging receivables is ____.
A) negative; positive
B) zero; positive
C) zero; zero
D) positive; negative
E) negative; negative

Question

Quizplus · Accepted Answer

Hedging is most desirable when it reduces costs. A negative expected real cost of hedging indicates a gain or cost reduction, making it desirable for both payables and receivables.

From the Perspective of Detroit Co