If an Australian Company Enters a Forward Exchange Contract to Buy

question 13

Multiple Choice

If an Australian company enters a forward exchange contract to buy US$15 000, then which of the following applies?

• A) The company's contractual obligation (at the forward rate) and contractual right (at the spot rate) are settled on a net basis.
• B) The company has a contractual obligation to deliver foreign currency at the settlement date and that obligation is realised at the spot rate.
• C) The company has a contractual right to receive US$15 000 at the settlement date and that right is an asset fixed in A$ at the forward rate.
• D) The company's forward contract will act as a hedge against a recognised asset.

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Definitions:

HRM Practice

Human Resource Management practices involve strategies, policies, and systems that manage people within an organization's work environment.

Pay Secrecy

The practice of discouraging or prohibiting employees from discussing their salaries with coworkers.

Focus Strategy

A competitive strategy where a business targets a specific niche in the market, catering to the unique needs of its segment.

Marketplace

A physical or digital space where buyers and sellers interact to exchange goods, services, or information.