An Importer Who Is Expecting to Pay for a Purchase

question 43

Multiple Choice

An importer who is expecting to pay for a purchase in three months' time buys a foreign- currency call option today.Which of the following is correct?

• A)Benefit from exercising the option if the foreign currency falls below the option exchange rate.
• B)Benefit from exercising the option if the foreign currency rises above the option exchange rate.
• C)Be protected from adverse exchange rate risk but be able to benefit financially from favourable exchange rate movements.
• D)Both A and C
• E)Both B and C