Your Firm, Which Operates in the United States, Has a Contractual

question 54

Multiple Choice

Your firm, which operates in the United States, has a contractual payment of £1 million due in 3 months. Which one of the following methods would be considered speculative regarding your exchange rate risk?

• A) Buy 1 million pounds now at the current spot rate.
• B) Buy 1 million pounds in 3 months at the current spot rate.
• C) Contract forward today to buy 1 million pounds in 3 months.
• D)Sell £1 million of goods in the United Kingdom now with payment due in 3 months.

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Definitions:

Agricultural Output

The total amount of agricultural products, including crops and livestock, produced within a specific time frame.

Technological Improvements

Technological improvements involve the application of better solutions that meet new requirements or existing market needs, often leading to increased efficiency and productivity.

Demand Inelastic

A situation where the quantity demanded of a good or service changes minimally in response to price changes.