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.