Suppose a U

question 30

Multiple Choice

Suppose a U.S.bank borrows money in London while a British company borrows money in New York.At the end of the loan period the U.S.company needs pounds to repay their loan and the British company needs dollars to repay their loan.Which of the following might be a good tool for these companies to reduce their currency risk?

• A)Currency futures contract
• B)Currency option contract
• C)Interest rate futures contract
• D)Interest rate swap contract
• E)Currency swap contract

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Definitions:

Capital Intensive

An industry or business that requires large amounts of money and resources (such as machinery or equipment) to produce goods or services.

Alternative Technologies

Refers to varying methods, tools, or systems that can be used as substitutes for each other in achieving a similar outcome, often considered in the context of environmental sustainability or efficiency improvements.

Hourly Wage Rate

The compensation employees receive for every hour they work.

Production Technology

The methods, equipment, and processes used to produce goods and services, impacting efficiency and output levels.