Which of the following is true for forward foreign exchange contracts?
A. They are used mostly to offset net asset positions held in the foreign currencies.
B. Common dates for future exchange are 50, 100, and 150 days forward.
C. The actual currency exchange occurs after one week from the stated time period.
D. They can be used for both speculation and hedging.
Answer: D
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What is the real interest rate if the nominal interest rate is 7 percent and the expected inflation rate is 7 percent?
A kinked demand curve
a. results from the heavy advertising expense required. b. occurs because, when one seller lowers the price, no one else will do so. c. is a basic characteristic of monopolistic competition markets. d. tends to be inelastic for price decreases and elastic for price increases.
Trade a. can make every participating nation better off
b. makes some participating nations better off and others worse off. c. makes a participating nation better off only if the nation cannot produce that good itself. d. helps developed countries and hurts developing countries.
When the budget deficit is the main cause of the trade deficit, governments should take steps to
a. reduce their budget deficits to prevent making their economy vulnerable to a rapid outflow of international financial capital that could bring a deep recession. b. increase their budget deficits to prevent making their economy vulnerable to a rapid outflow of international financial capital that could bring a deep recession. c. reduce their budget deficits to prevent making their economy vulnerable to a rapid inflow of international financial capital that could bring a deep recession. d. increase their budget deficits to prevent making their economy vulnerable to a rapid inflow of international financial capital that could bring a deep recession.