Chartered Investment Manager (CIM) Practice Exam · Question
A Canadian investor holds a portfolio with significant exposure to US equities. To hedge against a depreciation of the US dollar relative to the Canadian dollar, the investor could:
To hedge against a depreciating US dollar, the investor would sell US dollar futures (or buy CAD futures), which profit if the US dollar weakens against the Can
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Question: A Canadian investor holds a portfolio with significant exposure to US equities. To hedge against a depreciation of the US dollar relative to the Canadian dollar, the investor could:
Answer options:
- Buy Canadian dollar futures contracts.
- Borrow in US dollars and invest in Canadian dollars. ✅ Sell US dollar futures contracts.
- Invest more heavily in US dollar-denominated bonds.
Correct answer: Sell US dollar futures contracts.
Explanation: To hedge against a depreciating US dollar, the investor would sell US dollar futures (or buy CAD futures), which profit if the US dollar weakens against the Canadian dollar, offsetting potential losses on the US equity holdings.
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Other Canadian certifications candidates often prepare for alongside this one.