1· gains and losses are\"realized\" whereas gains ar )Translation; transaction B

Question

1· gains and losses are"realized" whereas gains ar )Translation; transaction B) Transaction; translation C) Translation; operating D) none of the above d losses are on "paper 2. Which following statement is INCORRECT? a) When the market is not in equilibrium, the potential for "risk-less" or arbitrage tp The theories about how exchange rate always work out to be "true" when compared to what students and A forward exchange agreement between currencies states the rate of exchange at which a foreign currency will be bought forward or sold forward at a specific date in the future RPPP holds that PPP is not particularly helpful in determining what the spot rate is today, but that the relative change in prices between two countries over a period of time determines the change in the exchange rate over that period While hedging can protect the owner of an asset from a loss, it also eliminates any gain from an increase in the value of the asset hedged against. practitioners observe in the real world c) d) e) cgoncrmrin exchange market. Currently the spot price for the Japanese yen is 129.87/5 and the 6-month forward rate is ¥128.53/$. Andrea thinks the yen will move to ¥128.00/5 in the next six months. Andrea should to profit from changing currency values a) do nothing b) buy dollar c) sell yen d) sell dollar e) sell dollar forward 4. A forward contract to deliver U.S. dollars for British pounds could be described either as a) selling dollars forward; buying pounds forward b) selling pounds forward; selling dollars forward c) selling pounds forward; buying dollars forward d) buying dollars forward; buying pounds forward e) buying dollars forward; selling pounds forward at cou s coun it is will di contract calls for the future delivery of a standard amount of foreign price.

Explanation / Answer

Option B) Transaction & Translation

Transaction gains and losses are “realized whereas translation gains and losses are only “paper”

It means when you really transact sale or purchase than only gains or losses realized but like at the year end you convert your forex A/P or A/R into the closing rate the gain or losses due to that is called translation gain or losses.

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