A ________ Strategy Replicates the Forward Contract by Borrowing in One

question 23

Multiple Choice

A ________ strategy replicates the forward contract by borrowing in one currency, converting to the other currency and investing in the new currency.

• A) cash-and-carry
• B) futures
• C) forward
• D) none of the above

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and a share in the company's profits.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and equity at a specific point in time.

Residual Dividend Policy

A financial strategy where dividends are paid out from the leftover or "residual" earnings after all project and operational expenses, and investments are fulfilled.

Debt-Equity Ratio

This ratio quantifies the balance of equity and debt financing a company uses for its assets.