Your US-Based Firm Is Deciding Between Using Currency Futures Contracts or or a Forward

question 63

Multiple Choice

Your U.S.-based firm is deciding between using currency futures contracts or a forward contract with its commercial bank in order to hedge a scheduled dividend from its subsidiary corporation in Germany.The dividend will be repatriated in July,while the currency futures contracts are only available for June or September delivery.Which of the following choices properly hedges the transaction without basis risk?

• A)Long Euro future contracts
• B)Short Euro future contracts
• C)Enter Forward to sell Euros forward in July
• D)Enter Forward to buy Euros forward in July

Understand the calculation and interpretation of Laspeyres and Paasche price indices.

Evaluate the effect of price changes on individual preferences and utility.

Apply basic economic principles to real-world scenarios involving consumer behavior and decision-making.

Understand the concepts of normal and inferior goods and their implications for consumer choice.

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Definitions:

Preadolescent Boys

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Premature Aging

The condition of experiencing the signs and symptoms of aging at an early stage, often due to genetic factors or environmental exposure.