A Forward Market Contract to Buy Japanese Yen Three Months

question 10

Multiple Choice

A forward market contract to buy Japanese yen three months in the future at a price of ¥105/$ will:

• A) insulate the buyer from changes in interest rates.
• B) protect the buyer from changes in exchange rates.
• C) lock in a profit based on current exchange rates.
• D)require delivery of the yen at the Chicago Board of Trade.

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Definitions:

Insider Trading

The unlawful activity where individuals trade on the stock market for personal gain using private, sensitive information.

Business Judgment Rule

A legal principle that protects the decisions of a corporate board of directors from judicial review as long as those decisions are made within their authority and with a reasonable belief that they were in the best interests of the company.

Currency Trader

An individual or entity that buys and sells currency pairs on the foreign exchange market to profit from exchange rate fluctuations.

Quorum

The minimum number of members required to be present to make the proceedings of a meeting valid.