A Forward Exchange Contract

question 3

Multiple Choice

A forward exchange contract

• A) gives the owner the right, but not the obligation, to buy a foreign currency at a fixed exchange rate for a fixed period of time.
• B) gives the owner the right to purchase a foreign currency at some point in the future and any gains or losses are credited/debited to the account at the close of business each day.
• C) requires delivery, at a specified future date, of one currency for a specified amount of another currency.
• D) requires delivery, within two working days, of one currency for a specified amount of another currency.

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Definitions:

Income Statement

An Income Statement is a financial report that shows a company's revenues, expenses, and profits over a specific period, providing insight into its financial performance.

Net Income

The amount of profit left after all operating expenses, taxes, and interest payments are deducted from total revenue.

Revenues

Revenues are the total income earned by a company from its normal business activities, before any expenses are deducted.

Expenses

Costs incurred in the process of earning revenue, typically categorized as certain costs necessary to operate a business.