Reference no: EM132864837

Problem 1: Johnson Co. has 1,000,000 euros as payables due in 30 days and is certain that the euro is going to appreciate substantially over time. Assuming the firm is correct, the ideal strategy is to:

a. Purchase euro forward

b. Purchase euro put option

c. Sell euro call option

d. Sell euros forward

Problem 2: Which of the following reflects a hedge of payables in British pounds by a U.S. firm?

a. Sell pounds forward.

b. Purchase a currency put option in British pounds.

c. Sell a currency call option in British pounds.

d. Borrow U.S. dollars, convert them to pounds, and invest them in a British pound deposit.

Problem 3: Which of the following is probably NOT appropriate for an MNC wishing to reduce its exposure to British pound payables?

a. Buy a pound futures contract.

b. Buy a pound call option.

c. Buy a pound put option.

d. Purchase pounds forward.