If You Have a Long Position in a Foreign Currency

question 34

Multiple Choice

If you have a long position in a foreign currency, you can hedge with:

• A)A short position in an exchange-traded futures option
• B)A short position in a currency forward contract
• C)A short position in foreign currency warrants
• D)Borrowing (not lending) in the domestic and foreign money markets

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Definitions:

Compounded Quarterly

Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan on a quarterly basis.

Loan

A sum of money that is borrowed, usually from a financial institution or individual, which is expected to be paid back with interest.

Payments

Transactions made by individuals or entities to fulfill obligations or to purchase goods and services.

Present Value

The immediate valuation of an upcoming sum of money or series of cash transactions, based on a given rate of return.