1. Answer the following Multiple choice question. Only choose the correct option. (1 mark each)

-Call options give the holder the right, but not the obligation, to buy a given quantity of some asset at some time in the future at prices agreed upon today.

1 point

True

False

-If you have a _____in a foreign currency in the future, you can negotiate a forward contract to _____the foreign currency forward.

1 point

payable; buy

payable; sell

receivable; buy

none of the above

-Options provide a flexible hedge against the downside, while preserving the upside potential.

1 point

True

False

-Choose the most accurate statement from the following list.

1 point

a. Forward contracts can be used to hedge transaction exposure

b. Money market hedge can be used to hedge transaction exposure

c. Triangular contracts can be used to hedge transaction exposure

d. both (a) & (b)

-When hedging techniques are not available, there are still some methods of reducing transaction exposure, such as leading and lagging and currency diversification.

1 point

True

False