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Why Would Investor Use Currency Futures or Forward Contracts to Hedge

Question 41

Multiple Choice

Why would investor use currency futures or forward contracts to hedge against exchange-rate risk?


A) to reduce the tax liabilities involved in windfall profits from an appreciating foreign currency
B) to eliminate political risk associated with exchange-rate risk
C) to reduce the uncertainty associated with the foreign company's ability to repay its debt
D) to reduce uncertainty concerning the exchange rate at which the foreign security holdings can be converted into domestic currency

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