A USImporter Scheduled to Make a Payment of €100,000 in Three

question 9

Multiple Choice

A U.S.importer scheduled to make a payment of €100,000 in three months can hedge his foreign exchange risk by:

• A)purchasing $100,000 in the forward market for delivery in three months
• B)selling €100,000 in the spot market for delivery in three months
• C)purchasing €100,000 in the forward market for delivery in three months
• D)selling €100,000 in the spot market for delivery in three months

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Definitions:

Specific Firm

Refers to a particular company or business entity distinct from others in its industry or sector.

Demand Curve Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price, indicating its sensitivity.

Brand Loyalty

A consumer's preference to buy a particular brand's product over alternatives consistently.

Monopolistic Competition

A market structure in which many firms sell products that are similar but not identical, allowing for significant control over pricing and some degree of market power.