1. The best way to hedge economic exposure is to
A. Hedge each and every foreign currency cash flow
B. Invoice recievables and payable in home currency
C. Use the reporting currency as the functional currency for all affiliates
D. Match up foreign currency inflows and outflows.
2. At T0 the exchange rate is $1.00/ £. At T1 the exchange rate is $.9130/ £. Over this period inflation increased 15 % in the UK and 5% in the US. This makes the real exchange rate at T1
A. $1.0953
B. $1.0000
C. $.9130
D. $.8336