In a forward hedge,the cash flow equals:
A)the amount of the foreign currency used in the hedge times the forward rate.
B)the amount of the currency the firm usually transacts business in times the forward rate.
C)the unhedged cash flow times the forward rate.
D)the unhedged cash flow.

Question

Quizplus · Accepted Answer

In a forward hedge, the company is locking in a specific exchange rate for a future transaction in a foreign currency. The cash flow will be equal to the amount of the foreign currency used in the hedge multiplied by the forward rate. This ensures that the company knows exactly how much they will receive or pay in their home currency when the transaction occurs.

In a Forward Hedge,the Cash Flow Equals