Which of the Following Statements Regarding Currency Options Is FALSE

question 41

Multiple Choice

Which of the following statements regarding currency options is FALSE?

• A)Firms often prefer forward contracts to currency options if the transaction they are hedging might not take place.
• B)Currency options are another method that firms commonly use to manage exchange rate risk.Currency options,like stock options,give the holder the right-but not the obligation-to exchange currency at a given exchange rate.
• C)Currency forward contracts allow firms to lock in a future exchange rate;currency options allow firms to insure themselves against the exchange rate moving beyond a certain level.
• D)Many managers want the firm to benefit if the exchange rate moves in their favor,rather than being stuck paying an above-market rate.

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Definitions:

Digestive Tract

A series of hollow organs joined in a long, twisting tube from the mouth to the anus, involved in digesting food.

Ghrelin

A hormone produced in the stomach that stimulates appetite, signaling the body to consume food.

Lateral Hypothalamus

A region of the hypothalamus involved in hunger regulation and the initiation of eating behavior.

Ventromedial Hypothalamus

An area of the brain that plays a significant role in regulating hunger and satiety, involved in stopping the sensation of hunger once an individual is full.