If a French Firm Desires to Avoid the Risk from Exchange

question 50

Multiple Choice

If a French firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to make payment on imports from Canada, it could:

• A) obtain a 90-day forward purchase contract on Canadian dollars.
• B) obtain a 90-day forward sale contract on Canadian dollars.
• C) purchase Canadian dollars 90 days from now at the spot rate.
• D) sell Canadian dollars 90 days from now at the spot rate.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of the good that consumers are willing to purchase.

Constant Marginal Cost

Describes a situation in production where the cost of producing an additional unit of output is the same, regardless of the level of production.

Profit-Maximizing

A strategy or point where a firm achieves the highest possible profit based on its production and selling activities.

Monopolist

A person, company, or entity that holds exclusive control over the market for a particular good or service, without competition.