Your US Firm Has an Accounts Payable Denominated in UK Pounds

question 2

Multiple Choice

Your U.S firm has an accounts payable denominated in UK pounds due in 6 months. To protect yourself against unexpected changes in the dollar/pound exchange rate you should:

• A) buy a pound put option.
• B) sell a pound put option.
• C) buy a pound call option.
• D) sell a pound call option.

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Definitions:

P = 4 + 3Q

A linear equation representing a direct relationship between price (P) and quantity (Q), where 4 is the fixed component, and 3 indicates the change in price per unit change in quantity.

Consumer Substitute

A product or service that consumers can choose as an alternative to another, similar product.

Supply Of Wheat

The quantity of wheat available in the market from producers at various price levels.

Price Of Wheat

The current market value at which wheat per unit (such as a bushel) can be bought or sold.