Forward exchange contracts may be used to: Hedge Risk Speculate No No No Yes Yes

Question

Forward exchange contracts may be used to: Hedge Risk Speculate No No No Yes Yes No Yes Yes Which of the following general types of transaction could be a foreign currency transaction? Operating Transactions forward Exchange Contract Transactions Yes Yes Yes No No Yes No No For accounting purposes, Which of the following are forward contracts? Foreign Currency Forward Exchange contracts Foreign Currency option Contracts Yes Yes Yes No No Yes No No Which one of the following is not associated with forward contracts? The contract may require a future purchase or sale. The contract provides for using the market at the date the contract is fulfilled. The contract may permit a future purchase or sale. The contract specifies the subject matter of the exchange.

Explanation / Answer

22) d)Hedge Risk : Yes and Speculation : YES

Explanation:

Forward contract is comes under one of future contract type but in this forward contract have the facilities of customerization with any commodity   this made non standard for future contract so it leads for more risk of hedge and speculation.

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23)A) OPeratingTranactions: Yes and Forward exchange Contract tranactions : Yes

Explanation:

Foreign currency transaction, we can expect foreign operational transaction because operational transaction team deciding the rates for the exchanges. Forward exchange contract made for today price for the foreign commodity of that could have been delivered in future for foreign currency

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25) b)The contract provides for using the market prices at the date the contract is fulfilled.

Explanation:

Forward contract fulfilled once the future commodities were delivered into concerned parties.

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