If a US Firm Desires to Avoid the Risk from Exchange Rate

question 99

Multiple Choice

If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000 in 90 days, it could:

• A) obtain a 90-day forward purchase contract on euros.
• B) obtain a 90-day forward sale contract on euros.
• C) purchase euros 90 days from now at the spot rate.
• D) sell euros 90 days from now at the spot rate.

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Definitions:

Silver Acetate

A chemical compound with the formula AgC2H3O2, used in plating and as a photographic agent.

NaCl

Sodium chloride, commonly known as table salt, an ionic compound consisting of sodium and chloride ions.

AgCl

Silver chloride, a white crystalline solid that is photosensitive and less soluble in water.

Spectator Ions

Ions that are present in a chemical reaction but do not participate in it, remaining unchanged throughout the reaction.