On March 1, Bechtel Submits a Franc?denominated Bid on a Project

question 39

Multiple Choice

On March 1, Bechtel submits a franc?denominated bid on a project in France. Bechtel will not learn until June 1 whether it has won the contract. What is the most appropriate way for Bechtel to manage the exchange risk on this contract?

• A) sell the franc amount of the bid forward for U.S. dollars
• B) buy French francs forward in the amount of the contract
• C) buy a put option on francs in the amount of the franc exposure
• D) sell a call option on francs in the amount of franc exposure

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Definitions:

Bilateral

Involving mutual agreements or obligations between two parties.

Unilateral

Pertaining to an action or agreement involving only one party, side, or faction.

Trilateral

Involving three parties, sides, or aspects; often used in the context of international treaties or agreements.

Mutual Misunderstanding

Mutual misunderstanding occurs when two or more parties have differing interpretations or perceptions about an agreement or situation.