When a US Company Purchases Parts from a Foreign Company, Which of Which

question 10

Multiple Choice

When a U.S. company purchases parts from a foreign company, which of the following will result in zero foreign exchange gain or loss?

• A) The transaction is denominated in U.S. dollars.
• B) The option strike price to sell foreign currency is less than the spot rate of the currency.
• C) The option strike price to buy foreign currency is less than the spot rate of the currency.
• D) The foreign currency appreciated in value relative to the U.S. dollar.
• E) The foreign currency depreciated in value relative to the U.S. dollar.

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Definitions:

Checkable Deposits

Refers to deposits in bank accounts from which individuals can write checks or use debit cards to make purchases directly.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposits, as mandated by central banking regulations.

Money Supply

Refers to the total amount of money—cash, coins, and balances held in checking and savings accounts—available within an economy at a specific time.

Deposits

Are funds placed into an account at a financial institution, creating a balance that can earn interest or be withdrawn for use.