Scenario: ABC Software ABC Software Is a Producer of Educational Software for Children

question 105

Multiple Choice

Scenario: ABC Software
ABC Software is a producer of educational software for children below the age of twelve. The company has operations in Switzerland and would like to expand its foreign operations with a new facility in China.
-If ABC Software holds a currency option to purchase Swiss francs at SF 1.67/$ in 30 days,at the end of which the exchange rate is SF1.70/$,then ABC Software ________.

• A) is required to follow through on a currency exchange
• B) has succeeded in hedging against exchange rate risk
• C) would exercise its currency option
• D) would not exercise its currency option

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Definitions:

Voltaic

Pertaining to electricity or electrical phenomena, especially those produced chemically, e.g., in voltaic cells where chemical energy is converted into electrical energy.

Anode

An electrode through which conventional current flows into a polarized electrical device; in electrolysis, it is the positively charged electrode.

Battery

A device used to convert chemical energy into electric energy. A group of voltaic cells connected together in a series or parallel connection.

Electromotive

Related to the generation or production of electromotive force or voltage.