If a firm is hedging payables with futures contracts, it may end up paying more for the payable than it would have had it remained unhedged if the foreign currency depreciates.

Question

Quizplus · Accepted Answer

If the foreign currency depreciates and the firm hedges with futures contracts, the futures contracts will become more expensive, resulting in the firm paying more than if it had remained unhedged.

If a Firm Is Hedging Payables with Futures Contracts, It