Consider the Following Assume the Current Market Futures Price Is 1

question 55

Multiple Choice

Consider the following: $$\begin{array}{l}\begin{array} { l l r } \text {Risk-free rate in Canada }&0.04 \text { year } \\\text {Risk-free rate in Switzerland }&0.03 / \text { year } \\\text {Spot exchange rate }&1.67 \mathrm{SF} / \$\end{array}\end{array}$$
Assume the current market futures price is 1.66 SF/$.You borrow 167,000 SF and convert the proceeds to Canadian dollars and invest them in Canada at the risk-free rate.You simultaneously enter a contract to purchase 170,340 SF at the current futures prices (maturity of 1 year) .What would be your profit (loss) ?

• A) Profit of 630 SF
• B) Loss of 2300 SF
• C) Profit of 2300 SF
• D) Loss of 630 SF
• E) None of these

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Definitions:

Raw Ingredients

Basic materials used in the initial stages of the production process to manufacture finished goods.

Time-Driven Activity-Based Costing

A costing method that assigns costs to products based on the time resources are used for their production.

Customer Support Department

A division of a company dedicated to helping customers with problems, questions, or complaints about products or services, aiming to enhance customer satisfaction.

Customer Cost Analysis

The process of analyzing the costs associated with serving a particular customer or customer segment, considering various cost factors to determine profitability.