Your Firm Is a U

question 52

Multiple Choice

Your firm is a U.K.-based importer of bicycles. You have placed an order with a Swiss firm for SFr. 1,000,000 worth of bicycles. Payment (in Swiss francs) is due in 12 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 maturity.

• A)Go short 100 12-month Swiss franc futures contracts; and long 50 12-month pound futures contracts.
• B)Go long 100 12-month Swiss franc futures contracts; and short 50 12-month pound futures contracts.
• C)Go short 100 12-month Swiss franc futures contracts; and short 50 12-month pound futures contracts.
• D)Go long 100 12-month Swiss franc futures contracts; and long 50 12-month pound futures contracts.
• E)None of the above

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Definitions:

Psychological Types

Categories or patterns of personality that are distinguished by particular traits or modes of behavior, often based on theories such as those by Carl Jung.

Interactions

The reciprocal actions and influences individuals have on each other in social settings.

Functions

Refer to specific, pre-defined operations or activities in various fields such as mathematics, where they map inputs to outputs, or in programming, where they are blocks of code designed to perform a particular task.

Sensing

The process of receiving information through the senses such as sight, sound, touch, taste, and smell.