A Forward Contract on Currency

question 48

Multiple Choice

A forward contract on currency:

• A) is a way to hedge credit (default) risk.
• B) is used to swap fixed interest payments in euros for variable interest payments in dollars.
• C) is an agreement between a customer and a bank to exchange one currency for another on a specified date at a specified exchange rate.
• D) is an agreement between a customer and a bank to exchange one currency for another on a specified date at whatever the exchange rate is on that day.

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Definitions:

Economic Trends

The general direction in which an economy is moving, based on statistical measures such as growth rates, inflation, and unemployment.

Social Trends

Patterns of change or stability in societal behaviors, attitudes, and cultural norms over time, which influence various aspects of society such as consumer behavior.

Global Expansion

Refers to a company's growth beyond its original national boundaries into international markets.

Middle Class

A socio-economic group between the working class and upper class, characterized by moderate income, education, and usually employment in professional or managerial positions.