Your Firm Will Be Importing a Large Order of Its

question 65

Multiple Choice

Your firm will be importing a large order of its inputs from the United States in six months and is concerned that the Canadian dollar might fall against the U.S.dollar over that time.To hedge your risk,you decide to enter into a currency forward contract to purchase 500,000 USD at a rate of 1.0232 CAD/USD.If the spot exchange rate in six months' time ends up being 0.9967 CAD/USD,what is your gain or loss from hedging compared to remaining unhedged?

• A)$0
• B)$12,992
• C)$13,250
• D)-$13,250
• E)-$12,992

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Definitions:

Mediation

A form of alternative dispute resolution where a neutral third party helps the disputing parties reach a mutually satisfactory agreement.

Arbitration

A method of dispute resolution where an impartial third party makes a binding decision to resolve a conflict outside of court.

Deposition

A sworn, out-of-court oral testimony of a witness that is used for gathering information as part of the discovery process and, in limited circumstances, as testimony at trial.

Preserve Testimony

The practice of documenting and saving witness statements or depositions to ensure their availability for future legal proceedings.