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