Describe a balance sheet hedge and give at least two examples of when such a hedge could be justified
What will be an ideal response?
Answer: A balance sheet hedge attempts to equalize the amount of assets and liabilities of a foreign subsidiary exposed to translation risk. Thus, the gain to the firm from a change in exchange rates will be perfectly offset by an equal and opposite loss. Firms may engage in balance sheet hedges under conditions of hyperinflation, or when the subsidiary is about to be liquidated and the value of the CTA account would be realized. The author on page 16 lists other examples.
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As a general rule, about 20% of a company's customers generate a loss instead of a profit for the company
Indicate whether the statement is true or false
The ratio between the number of older people and younger people, on whom elders are dependent to supply the funds to provide social security benefits, is called the ___________.
A. graying challenge B. grandparent dilemma C. population distribution D. population density E. dependency ratio
Which of the following describes the behavior of the fixed cost per unit?
A) Decreases with increasing production B) Decreases with decreasing production C) Remains constant with changes in production D) Increases with increasing production
Subgroups within the larger, or national, culture with unique values, ideas, and attitudes are referred to as
A. social classes. B. normative groups. C. reference groups. D. subcultures. E. families.