alleryStart learning →A buyer locked in 104,000 under a forward while the market value at maturity is 110,000. The buyer gains
A104,000
B6,000
C110,000
D14,000
Answer & Solution
Correct answer: B. 6,000
Buying at 104,000 and selling at 110,000 gives a profit of 6,000, and the seller loses the same amount.
Keep practising Foreign Exchange Exposure and Risk Management
Browse all Foreign Exchange Exposure and Risk Management questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
European banks may use their own VaR models to setUnder the Bretton Woods system, many businessesA shift in exchange rates that changes demand for a good sold abroad is an example ofEconomic risk of foreign investment includes exchange rates, regulation andFutures cannot fully mitigate currency risk as they exist only forForward and futures contracts are similar in that bothThe Garman-Kohlhagen formula needs two interest rates becauseThe value of a European FX option is typically computed assuming the exchange rate follows