A Firm in Canada Is Due to Receive Payment of 1

question 28

Essay

A firm in Canada is due to receive payment of 1 million Australian Dollars in 10 year's time.It would like to protect itself against a decline in the value of the Australian Dollar but finds it difficult to arrange a forward sale for such a long period.Is there any other way that it can protect itself?

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Definitions:

Demand Schedule

A table or graph showing the quantity of a product that consumers are willing and able to purchase at various prices over a specified period of time.

Law Of Demand

The principle that, other things equal, an increase in a product’s price will reduce the quantity of it demanded, and conversely for a decrease in price.

Price-Elasticity Coefficient

A numerical measure of the responsiveness of the quantity demanded or supplied of a good to a change in its price.

Elastic

A term in economics that describes the sensitivity of demand or supply to changes in price or income.