The Biggest Advantage to Purchase Foreign Currency Using the Forward

question 51

Multiple Choice

The biggest advantage to purchase foreign currency using the forward rate is to

• A) Earn a premium on the exchange
• B) Lock into a price now
• C) Gain from future price reductions
• D) Avoid the more expensive spot rates
• E) All of the above

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Definitions:

Required Return

The minimum expected return by investors for investing in a risky asset, taking into account the risk associated with the asset.

Intrinsic Value

The perceived or calculated true value of an asset, investment, or company based on fundamental analysis.

Free Cash Flow (FCF)

Cash generated by a company after deducting capital expenditures from its operating cash flow, available for debt repayment, dividends, or reinvestment.

Weighted Average Cost of Capital (WACC)

A calculation that reflects the cost of a company to finance its operations through a mix of debt and equity, considering the cost of each capital component.