If One Has Agreed to Buy Foreign Exchange Forward

question 41

Multiple Choice

If one has agreed to buy foreign exchange forward

• A)you have a short position in the forward contract.
• B)you have a long position in the forward contract.
• C)until the exchange rate moves, you haven't made money, so you're neither short nor long.
• D)you have a long position in the spot market.

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Definitions:

Conditional Probability

The probability of an event occurring given that another event has already occurred.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment's cost.

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated as the net profit divided by the initial cost.