The Current Exchange Rate Is €1

question 7

Multiple Choice

The current exchange rate is €1.25 = £1.00 and a British firm offers a French customer the choice of paying a £10,000 bill due in 90 days with either £10,000 or €12,500.

• A)The seller has given the buyer an at-the-money put option on euro with a strike in pounds.
• B)The seller has given the buyer an at-the-money put option on pounds with a strike in euro.
• C)The seller has given the buyer an at-the-money call option on euro with a strike in pounds.
• D)None of the above

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Definitions:

Special Kind

A term that refers to a unique or particular type or category of something, often used to specify or differentiate items or circumstances.

Depositary Bank

A financial institution that holds and manages the deposits of securities for investors, facilitating the trading of these securities.

Payor Bank

The bank on which a check is drawn and that is responsible for paying the amount of the check to the holder.

Collection Process

The steps taken by creditors or agencies to recover debts owed by individuals or businesses, often involving contacting the debtor, negotiating payment plans, and possibly legal action.