Which of the Following Reflects a Hedge of Net Payables

question 29

Multiple Choice

Which of the following reflects a hedge of net payables on British pounds by a U.S. firm?

• A) purchase a currency put option in British pounds.
• B) sell pounds forward.
• C) sell a currency call option in British pounds.
• D) borrow U.S. dollars, convert them to pounds, and invest them in a British pound deposit.
• E) A and B

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Definitions:

Profit-maximizing Output

The level of production at which a company achieves the highest possible profit, determined by the point where marginal revenue equals marginal cost.

Production Function

A mathematical representation of the relationship between inputs (like labor and capital) and the maximum output that can be produced with those inputs.

Profit-maximizing Quantity

The level of output at which a firm achieves the greatest profit, determined when marginal revenue equals marginal costs.

Profit-maximizing Quantity

The quantity of a product that results in the highest possible profit for the producer, determined by the point where marginal cost equals marginal revenue.