Corporation C is a mutual fund company. For the past few months, the management was alarmed by the deterioration of the Philippine Capital Markets. In order to avoid greater losses, the management decided to hedge their funds in Fiji, a very stable economy yet the exchange rate of their currency vis a vis the Philippine peso is quite extreme wherein peso is quite dominant than Fiji’s currency. Decide which of the choices is correct. A. This is the best model of international diversification B. This is to be considered a risk-spreading C. The company opens its gate to greater risk D.All of the above choices are correct

Corporation C is a mutual fund company. For the past few months, the management was alarmed by the deterioration of the Philippine Capital Markets. In order to avoid greater losses, the management decided to hedge their funds in Fiji, a very stable economy yet the exchange rate of their currency vis a vis the Philippine peso is quite extreme wherein peso is quite dominant than Fiji’s currency. Decide which of the choices is correct. A. This is the best model of international diversification B. This is to be considered a risk-spreading C. The company opens its gate to greater risk D.All of the above choices are correct

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter12: Managing Economic Exposure And Translation Exposure

Section: Chapter Questions

Problem 3IEE

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