If a Foreign Exchange Speculator Expects the Spot Rate of the Dollar

question 27

Multiple Choice

If a foreign exchange speculator expects the spot rate of the dollar nine months from today to be lower than today's forward rate on the dollar for delivery in nine months,she may

• A)buy dollars in the spot market nine months from today.
• B)sell dollars in the spot market nine months from today.
• C)sell dollars forward today and buy them in the spot market nine months from today.
• D)buy dollars forward today and resell them in the spot market nine months from today.

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Definitions:

Parent's Cash Flows

The cash inflows and outflows directly associated with the primary operating entity in a group of companies or conglomerate.

AASB 121

Refers to the Australian Accounting Standards Board provision dealing with the effects of changes in foreign exchange rates.

Exchange Differences

Variance arising from translating foreign currency transactions or foreign operations into the reporting currency.

Presentation Currency

The form of money used to express the financial records of a company.