Question

Assume that Cooper Co. will not use its cash balances in a money market hedge. When deciding between a forward hedge and a money market hedge, it _______ determine which hedge is preferable before implementing the hedge. It _______ determine whether either hedge will outperform an unhedged strategy before implementing the hedge.

Answer 1

Can;Cannot

Assume that Cooper Co. will not use its cash balances in a money market hedge. When deciding between a forward hedge and a money market hedge, it ___can____ determine which hedge is preferable before implementing the hedge. It ___cannot____ determine whether either hedge will outperform an unhedged strategy before implementing the hedge.

Step-by-step explanation:

Since Cooper Co isn't using its cash balances in a money market hedge, it can only choose the preferred hedge (the one that looks favourable), but cannot for sure know how best either hedges performs than the other.