Your Firm Is a U

question 25

Multiple Choice

Your firm is a U.S.-based exporter of bicycles.You have sold an order to a French firm for €1,000,000 worth of bicycles.Payment from the French firm (in euro) is due in three months.Detail a strategy using futures contracts that will hedge your exchange rate risk.Have an estimate of how many contracts of what type and how much (in $) your firm will have.

• A)Go short 12 six-month forward contracts; pay $1,290,000.
• B)Go short 16 six-month forward contracts.Pay $1,230,000.
• C)Go long 16 six-month forward contracts; raise $1,230,000.
• D)Go long 12 six-month forward contracts.Receive $1,230,000.

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Definitions:

Exhibitionism

A sexual disorder characterized by a powerful urge to expose one's genitals to an unsuspecting stranger for sexual satisfaction.

Voyeurism

An interest in or practice of obtaining sexual gratification from watching others without their consent, especially when those being watched are in a private act.

Body Parts

The distinct pieces or sections of a living organism's body, each serving specific functions.

Domination and Submission

A set of behaviors, customs, and rituals involving the giving and accepting of control of one individual over another within an erotic or lifestyle context.