Which of the Following Does Not Represent the Risk from Using

question 68

Multiple Choice

Which of the following does not represent the risk from using forward contracts?

• A) if a forward contract is used to hedge receivables, and the spot exchange rate at the expiration of contract exceeds the contract price.
• B) if a forward contract is used to hedge receivables, and the spot exchange rate at the time of expiration of contract is lower than the contract price.
• C) if a forward contract is used to hedge payables, and the spot exchange rate at the time of expiration of contract is lower than the contract price.
• D) if a forward contract is used to hedge payables or receivables and the amount to be received or paid is cancelled.

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Definitions:

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a good or service.

Economic Profit

The discrepancy between gross revenue and comprehensive costs, inclusive of both apparent and implied expenses.

Marginal Cost

The supplementary cost associated with manufacturing one more unit of a good or service.

Decreasing Its Output

A strategy or condition where a firm reduces the quantity of goods or services it produces, often in response to lower demand or to increase prices.