If an Australian Company Enters a Forward Exchange Contract to Buy

question 17

Multiple Choice

If an Australian company enters a forward exchange contract to buy US$30 000, then which of the following applies?

• A) The company's forward contract will act as a hedge against a recognised asset.
• B) The company's contractual obligation (at the forward rate) and contractual right (at the spot rate) are settled on a net basis.
• C) The company has a contractual obligation to deliver foreign currency at the settlement date and that obligation is realised at the spot rate.
• D) The company has a contractual right to receive US$30 000 at the settlement date and that right is an asset fixed in A$ at the forward rate.

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Definitions:

Service Plans

Agreements or contracts that offer customers specific services, usually for a predetermined price and duration.

Nanny-Camera

A hidden camera used for monitoring interactions within one's home, especially for observing caregivers.

Monitoring

Monitoring involves the continuous or regular observation and checking of activities or processes to ensure they are going as planned or meeting standards.

Moral Hazard

The situation in which one party is inclined to take risks because the negative consequences of the risk will be borne by another party.