Instruction 10.1: Use the Information for the Following Problem(s)

question 53

Multiple Choice

Instruction 10.1:
Use the information for the following problem(s) .
Central Valley Transit Inc. (CVT) has just signed a contract to purchase light rail cars from a manufacturer in Germany for €3,000,000. The purchase was made in June with payment due six months later in December. Because this is a sizable contract for the firm and because the contract is in euros rather than dollars, CVT is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information.
• The spot exchange rate is $1.250/euro
• The six-month forward rate is $1.22/euro
• CVT's cost of capital is 11%
• The Euro zone 6-month borrowing rate is 9% (or 4.5% for 6 months)
• The Euro zone 6-month lending rate is 7% (or 3.5% for 6 months)
• The U.S. 6-month borrowing rate is 8% (or 4% for 6 months)
• The U.S. 6-month lending rate is 6% (or 3% for 6 months)
• December call options for euro 750,000; strike price $1.28, premium price is 1.5%
• CVT's forecast for 6-month spot rates is $1.27/euro
• The budget rate, or the highest acceptable purchase price for this project, is $3,900,000 or $1.30/euro
-Refer to Instruction 10.1. If CVT locks in the forward hedge at $1.22/euro, and the spot rate when the transaction was recorded on the books was $1.25/euro, this will result in a "foreign exchange accounting transaction ________ of ________.

• A) loss; $90,000
• B) loss; €90,000
• C) gain; $90,000
• D) gain; €90,000

Explain the concept of early scripts in cognitive development.

Describe the characteristics of the preoperational stage in cognitive development.

Understand that children's cognitive development may be more advanced than Piaget originally believed.

Recognize Piaget's concept of centered thinking during early childhood.

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Definitions:

Values

Fundamental beliefs or principles that guide behavior and decision-making.

Beliefs

Mental attitudes or positions held by individuals that something is true or exists, even without empirical evidence.

Intentions

Plans or objectives that a person intends to accomplish or bring about.

Cognitive Maturity

The level at which an individual's thinking processes have developed, including the ability to reason, understand complex ideas, and learn from experience.