If a Company Takes Out a Forward Exchange Contract,which of the Following

question 32

Multiple Choice

If a company takes out a forward exchange contract,which of the following is correct?

• A) At the maturity date, the company can pay either the forward rate that was contracted or the then-current rate.
• B) Taking out a forward exchange contract is always cheaper than waiting to pay spot rates.
• C) Paying the spot price is safer than taking out a forward exchange cover.
• D) The company's cost is locked in from the beginning of the contract, regardless of market changes.

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Definitions:

Elements

Fundamental components or constituents of something, often referred to in the context of abstract concepts, compounds, or a set of parts.

Qualitative Characteristics

These are the attributes that make the information provided in financial statements useful to users.

Understandability

A characteristic of financial information that makes it comprehensible to those with a reasonable knowledge of business and economic activities.

Decision Usefulness

A principle in accounting that information should help users make decisions regarding their investments, credit, and similar considerations.