The Current Spot Exchange Rate Is $1

question 82

Multiple Choice

The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.50/€.Based on your analysis of the exchange rate,you are confident that the spot exchange rate will be $1.52/€ in three months.Assume that you would like to buy or sell €1,000,000.What actions do you need to take to speculate in the forward market?

• A)Take a long position in a forward contract on €1,000,000 at $1.50/€.
• B)Take a short position in a forward contract on €1,000,000 at $1.50/€.
• C)Buy euro today at the spot rate,sell them forward.
• D)Sell euro today at the spot rate,buy them forward.

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Definitions:

Personal Income Tax

A tax levied by government on individuals or households based on their total yearly income from all sources.

Consortium

A group of companies or institutions formed to undertake an enterprise or project together, often pooling resources for a common goal.

Market Advantage

Market advantage refers to a strategic edge one company holds over competitors within its industry or market, often leading to stronger sales or brand loyalty.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders, and is recognized as such by law with rights and liabilities that are distinct from those of its members.