If your firm expects the euro to substantially depreciate, it could speculate by ____ euro call options or ____ euros forward in the forward exchange market.
A) selling; selling
B) selling; purchasing
C) purchasing; purchasing
D) purchasing; selling

Question

​If your firm expects the euro to substantially depreciate, it could speculate by ____ euro call options or ____ euros forward in the forward exchange market.
A) ​selling; selling
B) ​selling; purchasing
C) ​purchasing; purchasing
D) ​purchasing; selling

Quizplus · Accepted Answer

If the euro is expected to depreciate, the firm would sell euro call options to profit from the premium and sell euros forward to lock in a higher exchange rate before the depreciation occurs.

​If Your Firm Expects the Euro to Substantially Depreciate, It

If Your Firm Expects the Euro to Substantially Depreciate, It