A Firm Owes a Large Future Payment That Must Be

question 56

Multiple Choice

A firm owes a large future payment that must be made in a foreign currency and wants to hedge the associated exchange rate risk. Which one of the following identifies the cost of such a hedge?

• A) Difference between expected and current spot rates
• B) Difference between expected and current forward rates
• C) Difference between the forward premium and the forward discount
• D)Difference between the forward rate and the expected future spot rate

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Definitions:

Erikson

A psychologist known for his theory on psychosocial development, which outlines eight stages that span from infancy to adulthood.

Feelings of Inferiority

Emotional states where an individual feels lesser or not as good as others, often influencing one's self-esteem and behaviors.

Psychosocial Stages

A theory developed by Erik Erikson outlining eight stages of psychological development that individuals undergo from infancy to late adulthood.

Erikson

Refers to Erik Erikson, a psychologist known for his theory on the psychological development of humans, characterized by eight stages from infancy to adulthood.