Which of the Following Is NOT True About a Range

question 1

Multiple Choice

Which of the following is NOT true about a range forward contract?

• A) It ensures that the exchange rate for a future transaction will lie between two values
• B) It can be structured so that it costs nothing to set up
• C) It is constructed from two options and a forward contract
• D) It can be used to hedge either a future inflow or a future outflow of a foreign currency

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Definitions:

Creditor Beneficiary

A third party who benefits from a contract in which the promisor agrees to pay the promisee’s debt.

Donee

The recipient of a gift or donation, who is typically not required to provide anything in return to the donor.

Incidental

Occurring as a minor accompaniment to something else or happening as a subordinate or secondary aspect.

Promisor

In a third-party beneficiary contract, the party to the contract who made the promise that benefits the third party.