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Portex Pty Ltd is a manufacturing company based in Australia that exports its product to the U.S. It expects payment on a large shipment of materials to the U.S. six months from today and is concerned about movements in the AUD/USD exchange rate. The current exchange rate is USD1=AUD0.7800 To hedge its foreign exchange exposure Portex needs to choose between the forward exchange market and the currency option market. Which of the following statements is correct? Select one: O To hedge the foreign exchange exposure Portex could either purchase a 6-month put option on USD with a strike price equal to the 6-month forward exchange rate, or enter a forward exchange contract to sell USD at the current forward exchange rate. If the USD depreciates, then choosing the option to hedge generally results in a more profitable outcome. O To hedge the foreign exchange exposure Portex could either purchase a 6-month put option on USD with a strike price equal to the 6-month forward exchange rate, or enter a forward exchange contract to purchase USD at the current forward exchange rate. Choosing the option always results in a less profitable outcome because the option must be paid for up front. O To hedge the foreign exchange exposure Portex could either purchase a 6-month put option on USD with a strike price equal to the 6-month forward exchange rate, or enter a forward exchange contract to sell USD at the current forward exchange rate. If the USD appreciates, then choosing the option to hedge generally results in a more profitable outcome. Portex Pty Ltd is a manufacturing company based in Australia that exports its product to the U.S. It expects payment on a large shipment of materials to the U.S. six months from today and is concerned about movements in the AUD/USD exchange rate. The current exchange rate is USD1=AUD0.7800 To hedge its foreign exchange exposure Portex needs to choose between the forward exchange market and the currency option market. Which of the following statements is correct? Select one: O To hedge the foreign exchange exposure Portex could either purchase a 6-month put option on USD with a strike price equal to the 6-month forward exchange rate, or enter a forward exchange contract to sell USD at the current forward exchange rate. If the USD depreciates, then choosing the option to hedge generally results in a more profitable outcome. O To hedge the foreign exchange exposure Portex could either purchase a 6-month put option on USD with a strike price equal to the 6-month forward exchange rate, or enter a forward exchange contract to purchase USD at the current forward exchange rate. Choosing the option always results in a less profitable outcome because the option must be paid for up front. O To hedge the foreign exchange exposure Portex could either purchase a 6-month put option on USD with a strike price equal to the 6-month forward exchange rate, or enter a forward exchange contract to sell USD at the current forward exchange rate. If the USD appreciates, then choosing the option to hedge generally results in a more profitable outcome.
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Related Book For
Accounting Business Reporting For Decision Making
ISBN: 9780730302414
4th Edition
Authors: Jacqueline Birt, Keryn Chalmers, Albie Brooks, Suzanne Byrne, Judy Oliver
Posted Date:
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