Buyer to purchase the underlying asset at the forward rate

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Reference no: EM131331056

1. In general, hedging with derivative contracts involves taking a position in the derivatives market that allows you to offset potential losses you might incur with the underlying asset.

True

False

2. Someone who chooses to speculate in the forward market must be willing to expose themselves to foreign exchange risk and credit risk.

True

False

3. An Italian firm will receive $10,000,000 in 6 months from its overseas operations. The company could buy a forward contract on 10 million dollars to hedge its foreign exchange risk.

True

False

4. A forward contract forces its buyer to purchase the underlying asset at the forward rate.

True

False

Reference no: EM131331056

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