22-128 If Canadian Dollar Futures Prices Fall

question 4

Multiple Choice

22-128 If Canadian dollar futures prices fall $.0199 per Canadian dollar from today's settlement prices,and there is no basis risk,what is the profit/loss on the futures position if the bank fully hedges currency risk?

• A)Sell 13 futures contracts for an end-of-year futures profit of $25,870.
• B)Buy 13 futures contracts for an end-of-year futures profit of $25,870.
• C)Sell 13 futures contracts for an end-of-year futures profit of $78,370.
• D)Buy 13 futures contracts for an end-of-year futures profit of $78,370.
• E)Sell 1 futures contract for an end-of-year futures profit of $76,380.

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Definitions:

Faulty Response

An incorrect or inappropriate reaction or answer given in response to a question, situation, or stimulus.

Direct Coping

A method of dealing with stress by tackling problems head-on and attempting to solve them directly.

Indirect Coping

Strategies that involve dealing with stress and problems in a less direct manner, such as through avoidance, distraction, or seeking support from others.

Defensive Coping

Strategies employed to protect oneself from psychological harm by minimizing stress or conflict.