US Firm Submitted a Fixed Bid for a Euro Multimillion

question 11

Multiple Choice

US firm submitted a fixed bid for a Euro multimillion project in Ukraine. The contract will be awarded in 12 months and the company knows there will be no advance payments. The company

• A) should pay the premium for a 3 months put currency option to hedge the quotation exposure.
• B) should write 3 months put currency option, receive the premium and roll it forward.
• C) should buy 12 months put option and limit the loss to the premium amount if the bid gets rejected.
• D) should get 1 year Euro denominated loan equal to the bid amount.

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Definitions:

Compensatory Damages

Monetary compensation awarded to a plaintiff to offset losses or injuries that have been incurred due to the defendant's actions.

Breaches

Violations or failures to perform as required or promised in a contract or agreement.

Contract

A legally enforceable agreement between two or more parties that creates mutual obligations enforceable by law.

Breach

The violation or non-fulfillment of a legal obligation, contract, duty, or standard.