Which of the Following Statements Regarding Currency Options Is FALSE

question 41

Multiple Choice

Which of the following statements regarding currency options is FALSE?

• A)Firms often prefer forward contracts to currency options if the transaction they are hedging might not take place.
• B)Currency options are another method that firms commonly use to manage exchange rate risk.Currency options,like stock options,give the holder the right-but not the obligation-to exchange currency at a given exchange rate.
• C)Currency forward contracts allow firms to lock in a future exchange rate;currency options allow firms to insure themselves against the exchange rate moving beyond a certain level.
• D)Many managers want the firm to benefit if the exchange rate moves in their favor,rather than being stuck paying an above-market rate.

---

Definitions:

RNA

Ribonucleic acid, a nucleic acid present in all living cells that acts as a messenger carrying instructions from DNA for controlling the synthesis of proteins.

Lipid Bilayers

A fundamental structure of cell membranes, consisting of two layers of lipid molecules with hydrophilic heads and hydrophobic tails.

Self-sealing

Characterizes materials or devices capable of automatically closing or repairing themselves after being punctured or cut.

Free Ends

The extremities or terminals of a linear structure, such as a piece of DNA or a thread, that are not attached or bonded to anything else.