Since a corporation can hedge exchange rate exposure at low cost Multiple Choice there is no benefit to the shareholders in an efficient market. shareholders would benefit from the risk reduction that hedging offers. the corporation's banker would benefit from the risk reduction that hedging offers. none of the options
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Which of the following is not correct? Hedging makes sense for our company because it allows us to eliminate risks that we do not wish to be exposed to, such as currency risk. A CFO of a company that uses oil as an input believes that oil prices will decrease. It would be wrong for the CFO to try to profit from this expectation by shorting oil futures contracts. The benefit of hedging input price risks for a company should increase if the company is highly levered and close to financial distress. Our company chooses not to hedge foreign currency risk because we believe the dollar will appreciate and this appreciation will increase our profits.
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