To Create a Range Forward Contract in Order to Hedge

question 7

Multiple Choice

To create a range forward contract in order to hedge foreign currency that will be paid, a company should: choose one)

• A) Buy a put and sell a call on the currency with the strike price of the put higher than that of the call
• B) Buy a put and sell a call on the currency with the strike price of the put lower than that of the call
• C) Buy a call and sell a put on the currency with the strike price of the put higher than that of the call
• D) Buy a call and sell a put on the currency with the strike price of the put lower than that of the call

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Definitions:

Horizontal Communication

The exchange of information, ideas, or messages among individuals or groups at the same level in an organization.

Pelz Effect

Subordinates feel more satisfied in their jobs the more their supervisors are able to influence higher-level decisions.

Manager's Power

The authority and influence a manager has over their direct reports, stemming from their position and the ability to affect employees' tasks and outcomes.

Newcomer Assimilation

The process by which a new member of a community, organization, or culture adopts its norms and practices.