Purchasing an Option to Buy Foreign Currency at a Predetermined

question 35

Multiple Choice

Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called:

• A) transfer pricing.
• B) hedging.
• C) translating.
• D) cross-listing.

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Definitions:

Competitive Price-Searcher

A market structure where firms have some control over the price because their products are differentiated, and consumers search for the best prices among competitors.

Long-Run Economic Profit

The excess revenue over costs, including opportunity costs and explicit costs, that a firm realizes when all inputs are considered variable, typically assumed in a period where firms can enter or exit the industry.

Potential Rivals

Companies or entities not currently in the market but possess the capability to enter and compete effectively.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market.