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Hedging translation exposures backfires and adoption of the Euro

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Hedging translation exposure with forward contracts can backfire if the currency being hedged depreciates.
true.
false.

The euro is the currency:
adopted in all western European countries as of 1999.
adopted in all eastern European countries as of 1999.
adopted in all European countries as of 1999.
none of the above.

Please provide answer and why...

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Solution Summary

The expert examines hedging translations exposures backfires and adoption of the Euro.

Solution Preview

True. If the currency being hedged depreciates, the agent has to buy the hedged currency at a higher than market rate, ...

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