If the foreign currency is expected to appreciate to a value lower than the appropriate forward rate:
A) a hedger will hedge foreign receivables by buying the foreign currency forward
B) a hedger will hedge foreign receivables by selling the foreign currency forward
C) a hedger will not hedge foreign receivables
D) a hedger will regret his decision to hedge foreign receivables if the foreign currency is lower than the forward rate at maturity

Question

Quizplus · Accepted Answer

If the foreign currency is expected to appreciate to a value lower than the appropriate forward rate, a hedger will hedge foreign receivables by selling the foreign currency forward to lock in the current forward rate and protect against potential losses due to the appreciation of the foreign currency.

If the Foreign Currency Is Expected to Appreciate to a Value