To Hedge a ____ in a Foreign Currency, a Firm

question 51

Multiple Choice

To hedge a ____ in a foreign currency, a firm may ____ a currency futures contract for that currency.

• A)receivable; purchase
• B)payable; sell
• C)payable; purchase
• D)none of the above

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Definitions:

Economic Loss

The decrease in financial value or wealth, often resulting from business operations, market movements, or external economic events.

Perfectly Competitive

Characterized by a large number of sellers and buyers, none of whom can influence market prices significantly.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and loan payments.

MC Curve

The Marginal Cost (MC) Curve is a graphical representation showing how the cost to produce one additional unit of a good changes as production volume increases.