The purchase of a currency put option would be appropriate for which of the following?
A)Investors who expect to buy a foreign bond in one month.
B)Corporations that expect to buy foreign currency to finance foreign subsidiaries.
C)Corporations that expect to collect on a foreign account receivable in one month.
D)all of the above

Question

The purchase of a currency put option would be appropriate for which of the following?​
A)Investors who expect to buy a foreign bond in one month.
B)Corporations that expect to buy foreign currency to finance foreign subsidiaries.
C)Corporations that expect to collect on a foreign account receivable in one month.
D)all of the above

Quizplus · Accepted Answer

The purchase of a currency put option would be appropriate for corporations that expect to buy foreign currency to finance foreign subsidiaries. This is because a put option gives the buyer the right but not the obligation to sell a specific amount of currency at a set price within a certain time frame. So, if the exchange rate decreases, the corporation can exercise its option to sell currency at a higher price, minimizing losses. It would not be appropriate for investors who expect to buy a foreign bond or corporations that expect to collect on a foreign account receivable, as those situations do not involve currency exchange rates.

The Purchase of a Currency Put Option Would Be Appropriate