Assume a U.S. company purchases 6,000 Euro worth of goods from an Italian company, on account, and will settle the balance in Euros on December 1, 2021. Which of the following derivatives can be used to hedge foreign exchange risk? A foreign currency put option to sell Euros that will settle on December 1, 2021. A foreign currency call option to buy Euros that will settle on December 1, 2021. A forward contract to sell Euros on December 1, 2021. None of the options.
Assume a U.S. company purchases 6,000 Euro worth of goods from an Italian company, on account, and will settle the balance in Euros on December 1, 2021. Which of the following derivatives can be used to hedge foreign exchange risk? A foreign currency put option to sell Euros that will settle on December 1, 2021. A foreign currency call option to buy Euros that will settle on December 1, 2021. A forward contract to sell Euros on December 1, 2021. None of the options.
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 16QA
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![Assume a U.S. company purchases 6,000 Euro worth of goods from an Italian company, on account, and will settle the balance in Euros on December 1, 2021.
Which of the following derivatives can be used to hedge foreign exchange risk?
A foreign currency put option to sell Euros that will settle on December 1, 2021.
A foreign currency call option to buy Euros that will settle on December 1, 2021.
A forward contract to sell Euros on December 1, 2021.
None of the options.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0689695d-f3b6-4e50-96e4-89a1a84e6d68%2Fb58153c9-9776-4de8-a41a-d94ef6628543%2Fy19n2rv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Assume a U.S. company purchases 6,000 Euro worth of goods from an Italian company, on account, and will settle the balance in Euros on December 1, 2021.
Which of the following derivatives can be used to hedge foreign exchange risk?
A foreign currency put option to sell Euros that will settle on December 1, 2021.
A foreign currency call option to buy Euros that will settle on December 1, 2021.
A forward contract to sell Euros on December 1, 2021.
None of the options.
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