What Has Occurred When One Company Arranges to Buy a Foreign

question 24

Multiple Choice

What has occurred when one company arranges to buy a foreign currency sometime in the future, at an exchange rate quoted today?

• A) The company has purchased a foreign currency option.
• B) The company has entered a forward contract.
• C) The currency has been devalued.
• D) None of the above

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Definitions:

Price Floor

A government-imposed minimum price charged on a product, below which it cannot be sold to prevent market prices from falling too low.

Surplus

An excess of revenues over expenses in a budget, or an excess of goods or materials than what is needed.

Price Floor

A government-imposed minimum price that can be charged for a good or service, aimed at preventing prices from falling too low.

Quantity Supplied

Refers to the amount of a good or service that producers are willing to sell at a given price over a specific period.