If a US Firm Desires to Avoid the Risk from Exchange Rate

question 99

Multiple Choice

If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000 in 90 days, it could:

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

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Definitions:

Normal Curve

A bell-shaped curve that represents the distribution of values, scores, or variables that are normally distributed.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Standard Deviation

A measure of dispersion in a set of values, indicating how much variation exists from the average.

Population Mean

The average of all values in a population, representing the central point of a data set.