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:

Investment Center

A segment or area of a business responsible for generating revenue as well as controlling its own costs and investments.

Balanced Scorecard

A performance evaluation approach that incorporates multiple performance dimensions by combining financial and nonfinancial measures.

Nonfinancial Measures

Performance indicators not based on financial data, often used to assess aspects like customer satisfaction, employee turnover, or production quality.

Financial Measures

Various metrics used to assess a company’s financial health, performance, and stability, including profitability, liquidity, and solvency ratios.