You Are Bidding on a Contract in a Foreign Currency

question 60

Multiple Choice

You are bidding on a contract in a foreign currency and you are not sure if you will win the bid.However,the analysis in your bid will be flawed if the foreign currency exchange rate changes between now and when you know whether you have won the contract.The best course of action to hedge your position is

• A) long a currency futures contract.
• B) short a currency futures contract.
• C) purchase an option to sell foreign currency for your currency.
• D) sell an option to sell foreign currency for your currency.

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Definitions:

Batholith

a large mass of intrusive igneous rock believed to have solidified deep beneath the Earth's surface.

Deep Batholithic Rocks

Large masses of intrusive igneous rock, originating deep within the Earth's crust, that have solidified from magma over millions of years.

Continent-Continent Collision

This term refers to the process in which two continental plates collide, leading to the formation of mountain ranges.

Hot Spot

A hot spot is a volcanic region thought to be fed by underlying mantle that is anomalously hot compared with the surrounding mantle.