A USImporter Scheduled to Make a Payment of €100,000 in Three

question 9

Multiple Choice

A U.S.importer scheduled to make a payment of €100,000 in three months can hedge his foreign exchange risk by:

• A)purchasing $100,000 in the forward market for delivery in three months
• B)selling €100,000 in the spot market for delivery in three months
• C)purchasing €100,000 in the forward market for delivery in three months
• D)selling €100,000 in the spot market for delivery in three months

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Definitions:

Preferred Dividends

Dividends that are paid out to preferred shareholders at a fixed rate before any dividends are paid to common shareholders.

Common Dividends

Payments made to shareholders out of a corporation's earnings, reflecting the portion allocated to holders of common shares.

Liquidation

The process of converting assets into cash, often during the winding down of a business or the selling off of stock.

Preferred Stock

Preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shareholders typically receive dividends before common shareholders.