The Firm That Enters into a Futures Contract with Respect

question 126

Multiple Choice

The firm that enters into a futures contract with respect to foreign exchange does so:

• A)to speculate on the movement in the value of the currency
• B)in anticipation of an increase in the value of the currency of the country for which the contract is established
• C)to decrease the cost of their sales transactions
• D)to eliminate a loss in the collection process of their accounts receivable in that country
• E)none of the above

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Definitions:

Compounded Monthly

Compounded monthly refers to the process where interest is calculated and added to the principal sum every month, effectively increasing the total amount at a quicker pace.

Amortization Period

The total time period over which a loan or mortgage is scheduled to be paid off, often through regular payments.

Compounded Quarterly

Interest on an investment or loan is calculated and added to the principal once every three months.

Monthly Payment

A specified amount paid every month, typically as part of a loan repayment plan.