If a Firm Hedges a Future Purchase of Euros by Purchasing

question 85

Multiple Choice

If a firm hedges a future purchase of euros by purchasing a call option,the firm ________ the potential cost but will benefit if the euro ________.

• A)fixes,depreciates
• B)fixes,appreciates
• C)caps,depreciates
• D)caps,appreciates
• E)eliminates,depreciates

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount contributed towards covering fixed costs and generating profit.

Performance Reports

Documents that review and assess the performance of individuals, departments, or organizations against planned objectives.

Cost Centers

Parts of an organization where costs are accumulated for internal accounting purposes but do not directly generate revenue.

Flexible Budget Data

Financial information that adjusts based on changes in activity levels, often used for performance evaluation.