Assume You Are a Chinese Exporter and Expect to Receive

question 48

Multiple Choice

Assume you are a Chinese exporter and expect to receive $250,000 at the end of 60 days. You can remove the risk of loss due to a devaluation of the dollar by:

• A)selling dollars in the 60-day forward exchange market.
• B)buying dollars now and selling these dollars at the end of 60 days.
• C)selling the yuan equivalent in the forward exchange market for 60-day delivery.
• D)keeping the dollars in the United States after they are delivered to you.

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Definitions:

Trade Restrictions

Measures imposed by governments to regulate international trade, including tariffs, quotas, and embargoes, to protect domestic industries or to affect political change.

Economic Inefficiency

A situation where resources are not utilized in the best possible way, leading to wastage and loss of potential output.

Saving Rate

The portion of income not spent on current expenditures or taxes and is typically expressed as a percentage of total personal disposable income.

Cost Of Capital

The rate of return a company must earn on its investments to maintain its market value and attract funds, encompassing the cost of debt and equity.