Which of the Following Statements Regarding Currency Options Is False

question 16

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 the 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 favour, rather than being stuck paying an above-market rate.

---

Definitions:

Basal Cell Carcinoma

A type of skin cancer that originates from basal cells in the skin's lower layers and is characterized by slow growth and seldom metastasizes.

Melanoma

A type of skin cancer that develops from the pigment-producing cells known as melanocytes.

Squamous Cell Carcinoma

A type of cancer that arises from flat cells of the epidermis, often associated with sun exposure, and is characterized by its ability to spread to other parts of the body.

Loose Connective Tissue

A type of connective tissue that holds organs in place and provides support to other tissues while also allowing the passage of nerves and blood vessels through other tissues.