A Way in Which a Foreign Currency Transaction Can Be

question 17

Multiple Choice

A way in which a foreign currency transaction can be hedged is:

• A) Buy (or sell) foreign currency at the date of the initial transaction
• B) Enter into a forward rate agreement to fix the cost of the currency at a fixed date in the future
• C) Enter into a transaction which neutralises the risk (e.g., have accounts receivable and accounts payable in the same currency with the same payment dates)
• D) All of the above

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Definitions:

Willingness to Pay

The maximum price at which a consumer will buy a good or service.

Basketball Sneakers

Athletic shoes designed specifically for playing basketball, offering features such as enhanced grip, ankle support, and shock absorption.

Consumer Surplus

The difference between the maximum price consumers are willing to pay and the actual price they do pay.

Lois's Consumer Surplus

Generally refers to a consumer surplus but appears to erroneously attribute it to an individual named Lois; consumer surplus is the difference between what consumers are willing to pay for a good or service versus what they actually pay.