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A Firm That Has a Manufacturing Unit in China Considers

question 41

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A firm that has a manufacturing unit in China considers shifting production to Cambodia. Which of the following would be a possible reason for it to not shift the production base?


Definitions:

Futures Contracts

Futures contracts are standardized legal agreements to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other.

Forward Contracts

Agreements to buy or sell an asset at a future date for a price specified today, not traded on an exchange.

Counterparty Risk

The risk that the other party in an agreement will default or fail to live up to their contractual obligations.

Futures Markets

Financial markets that facilitate the buying and selling of future contracts, which are agreements to buy or sell an asset at a future date at a price specified today.

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