A US Manufacturer Arranges to Purchase Parts from a German Supplier

question 2

Multiple Choice

A U.S. manufacturer arranges to purchase parts from a German supplier for 500,000 euros in six months. The U.S. manufacturer is concerned that the dollar will depreciate against the euro, meaning the dollar cost of the 500,000 euros will rise. What should the U.S. manufacturer do?

• A) lobby the Fed to lower interest rates on six-month T- bills
• B) buy a futures contract that fixes the dollar cost of 500,000 euros in six months
• C) buy an exchange rate contract that pegs the interest rate to the discount rate on interbank loans
• D) sell a naked option to cover the output spread

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Definitions:

Happiness

A state of well-being and contentment characterized by feelings of joy, satisfaction, and fulfillment.

Collectivism

A cultural value that prioritizes group cohesion and solidarity over individual interests.

Social Acceptance

The act of being recognized, valued, and embraced by others within a social context or group.

Group Harmony

The state of agreement, peace, and unity within a group, where members often prioritize collective well-being over individual desires.