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:

Marginal Cost

The price of creating an additional unit of a good or service.

Mohair Loan Subsidies

Financial support programs specifically targeting the mohair industry, often to assist farmers or producers with loans at favorable rates.

Angora Goat

A breed of goat known for its soft, long wool called mohair, originally from Ankara, Turkey.

Public Good

A product that one individual can consume without reducing its availability to another individual, and from which no one is excluded, such as national defense or public parks.