Market prices allow the treasury to ______.
A) avoid transactions costs on internal hedges
B) benchmark the costs of internal hedges
C) use transfer prices to minimize the MNC's tax liability
D) More than one of the above
E) None of the above

Question

Quizplus · Accepted Answer

Market prices allow the treasury to benchmark the costs of internal hedges by comparing them to external market prices. This helps the treasury ensure that the company is getting the best deal possible on its hedging activities. While market prices may also help avoid transaction costs and minimize tax liability through transfer pricing, these are not the primary benefits of using market prices for internal hedges.

Market Prices Allow the Treasury to ______