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CTP · Question #177
CTP Question #177: Real Exam Question with Answer & Explanation
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Question
- (Topic 2) A multinational company owns a United Kingdom subsidiary that has total assets equal to £1 million and intercompany loans due to the parent company equal to $1 million. It would like to undertake a balance sheet hedge of the U.K. subsidiary's GBP liability because it expects a depreciation of the pound. Given these circumstances, which of the following actions would be appropriate?
Options
- ABorrow GBP from a U.K. bank to repay the intercompany dollar debt.
- BBorrow USD from a U.K. bank to repay the intercompany dollar debt.
- CTake no action because exchange rates cannot be predicted.
- DExchange rates are fixed and thus no losses should occur.
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