If a Firm Hedges a Future Purchase of Euros by Purchasing

question 85

Multiple Choice

If a firm hedges a future purchase of euros by purchasing a call option,the firm ________ the potential cost but will benefit if the euro ________.

• A)fixes,depreciates
• B)fixes,appreciates
• C)caps,depreciates
• D)caps,appreciates
• E)eliminates,depreciates

---

Definitions:

Compounded Monthly

A method of calculating interest where interest is added to the principal balance of an investment or loan once a month.

Future Value

The value of an investment or asset at a specified date in the future, taking into account factors such as interest rates or earnings.

Ordinary Annuity

A sequence of identical payments that are distributed at consistent intervals, where the initial payment is made at the conclusion of the period.

RRSP

Registered Retirement Savings Plan, a retirement savings and investment account for holding savings and investment assets, recognized by the Canadian government.