Which of the Following Statements Is False

question 2

Multiple Choice

Which of the following statements is false?

• A) Currency options allow firms to lock in a future exchange rate; currency forward contracts allow firms to insure themselves against the exchange rate moving beyond a certain level.
• B) Generally speaking, cash-and-carry strategies are used primarily by large banks, which can borrow easily and face low transaction costs.
• C) Currency options, like stock options, give the holder the right-but not the obligation-to exchange currency at a given exchange rate.
• 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.

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Definitions:

Individual Qualities

Personal attributes or characteristics that distinguish one person from another.

Tendency To Affiliate

The innate or acquired propensity of individuals to seek out, form, or maintain social connections and relationships with others, often heightened during periods of stress or uncertainty.

Social Exchange Theory

A theoretical framework suggesting that social behavior is the result of an exchange process aiming to maximize benefits and minimize costs in relationships.

Minimax Principles

Strategy in decision-making that minimizes the maximum possible loss or maximizes the minimum gain.