In the presence of bid-offer spreads the decision NOT to hedge receivables in the money market will be taken if:
A) the offer interest parity forward rate is lower than the expected offer spot rate
B) the bid interest parity forward rate is higher than the expected bid spot rate
C) the bid interest parity forward rate is lower than the expected bid spot rate
D) the bid interest parity forward rate is higher than the expected offer spot rate

Question

Quizplus · Accepted Answer

The decision not to hedge receivables in the money market will be taken if the bid interest parity forward rate is lower than the expected bid spot rate, as it suggests that the forward rate is less favorable than the expected future spot rate.

In the Presence of Bid-Offer Spreads the Decision NOT to Hedge