Your US Firm Has a £100,000 Payable with a 3-Month Maturity

question 55

Multiple Choice

Your U.S. firm has a £100,000 payable with a 3-month maturity. Which of the following will hedge your liability?

• A)Buy the present value of £100,000 today at the spot exchange rate, invest in the U.K. at i_£.
• B)Buy a call option on £100,000 with a strike price in dollars.
• C)Take a long position in a forward contract on £100,000 with a 3-month maturity.
• D)All of the above

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Definitions:

Critical Path

A project management tool that identifies the sequence of crucial and interdependent steps that comprise a project's longest duration.

PERT Network

Project Evaluation and Review Technique; a project management tool used to schedule, organize, and coordinate tasks within a project.

Organizational Response

The way an organization reacts to internal or external stimuli, challenges, or opportunities.

Technology Leader

An individual or organization pioneering in the development, utilization, and application of new technologies, setting trends in the industry.