A Forward Market Contract to Buy Japanese Yen Three Months

question 42

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:

Unrecognized Actuarial (Gain)Loss

Financial gains or losses in pension plans or other post-employment benefit plans that have not been recognized in financial statements.

Income Statement Reporting

The process of presenting revenue, expenses, and profits or losses over a specific period in an income statement.

Other Postretirement Benefits

Benefits, other than pension distributions, that an employee is entitled to receive after retirement, such as life insurance and medical benefits.

Cash Basis of Accounting

An accounting method where revenues and expenses are recognized only when cash is received or paid.