A(n) ____________________ is an agreement to exchange one currency for another c

Question

A(n) ____________________ is an agreement to exchange one currency for another currency on a specific future date and at a specific rate.

forward foreign exchange contract

arbitrage agreement

currency swap agreement

covered interest contract

Assume you are a Spanish exporter and expect to receive $450,000 at the end of 90 days. You can remove the risk of loss due to a devaluation of the dollar by:

selling dollars in the 90-day forward exchange market.

buying dollars now and selling these dollars at the end of 90 days.

selling the euro equivalent in the forward exchange market for 90-day delivery.

keeping the dollars in the United States after they are delivered to you.

What implications for international financial repositioning and for the current spot exchange rate would flow from an increase in the current domestic interest rate?

Repositioning toward domestic currency assets results in the domestic currency depreciating.

Repositioning toward foreign currency assets results in the domestic currency depreciating.

Repositioning toward domestic currency assets results in the domestic currency appreciating.

Repositioning toward foreign currency assets results in the domestic currency appreciating.

What implications would a decrease in foreign interest rates have for the direction of international financial repositioning and for the current spot exchange rate?

Repositioning toward domestic currency assets and the domestic currency depreciates

Repositioning toward foreign currency assets and the domestic currency depreciates

Repositioning toward domestic currency assets and the domestic currency appreciates

Repositioning toward foreign currency assets and the domestic currency appreciates

What implications for international financial repositioning and for the current spot exchange rate would flow from a decrease in the expected future spot rate value of a country's currency?

Repositioning toward this country's currency assets results in the country's currency depreciating.

Repositioning toward foreign currency assets results in this country's currency depreciating.

Repositioning toward this country's currency assets results in the country's currency appreciating.

Repositioning toward foreign currency assets results in this country's currency appreciating.

Explanation / Answer

Ans:

1) forward foreign exchange contract

Forward contract is an agreements between two parties to exchange two designated currencies at a predetermined rate at a specific time in the future.

2) selling dollars in the 90-day forward exchange market.

In this case the spanish exporter receives in dollar at the end of 90 days and in order to safe guard against risk of devaluation he need to enter in to a 90-day forward exchange contract to sell dollars of $450,000.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.