A Company Knows It Will Have to Pay a Certain

question 8

Multiple Choice

A company knows it will have to pay a certain amount of a foreign currency to one of its suppliers in the future.Which of the following is true

• A) A forward contract can be used to lock in the exchange rate
• B) A forward contract will always give a better outcome than an option
• C) An option will always give a better outcome than a forward contract
• D) An option can be used to lock in the exchange rate

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Definitions:

Dividend Yield

A metric reflecting how a company's yearly dividend disbursements stand in relation to its share price.

Aggregate Stock Market

The total valuation of all publicly traded stocks in a specific market, often used to gauge market trends.

Technical Analysts

Professionals who evaluate securities through statistical analysis, market indicators, and historical price and volume data.

Stock Prices

The cost of purchasing a share of a company, which fluctuates based on market conditions and company performance.