You Enter into a Forward Contract to Take Delivery of One

question 69

Multiple Choice

You enter into a forward contract to take delivery of one million Deutsche marks three months from now.What happens to the price you will pay at expiration if marks depreciate during the contract?

• A)Your price will increase
• B)Your price will decrease
• C)Your price was fixed at the onset of the contract
• D)Your price was fixed, and you will receive correspondingly more marks due to the depreciation

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Definitions:

Empirical Rules

statistical rules that apply to normal distributions, describing how many observations fall within certain standard deviations from the mean.

Label

A label is a piece of information attached to an object, product, or document that provides identification, description, warnings, or instructions.

Operating Departments

Divisions or units within an organization directly involved in its core operational activities, responsible for creating products or services.

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Allocation bases are criteria or standards used to distribute costs among different departments, activities, or products in a company.