Which of the Following Statements Regarding Currency Options Is False

question 1

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

Learn how the net present value is influenced by the interest rate.

Comprehend the impact of interest rates on consumer behavior and purchasing decisions.

Grasp the difference between real and nominal interest rates, including the role of inflationary premium.

Recognize the importance of economic efficiency in relation to capital expansion and utilization.

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Definitions:

Synergist

Muscle that works with other muscles to cause a movement.

Cause Movement

To initiate or provoke a change in position or action within a system or organism.

Sternocleidomastoid Muscle

A major muscle in the neck that plays a key role in rotating and flexing the head.

Rotate

The action of turning around an axis or center point, either in objects or in anatomical terms as movements of body parts.