Midterm Study Guide Chapter 15

A direct quote for the U.S. dollar is given at $1.45 per 1 foreign currency unit (fcu). The respective indirect quote for the U.S. dollar would be reported as Selected Answer: Incorrect 1.45 fcu = $1.00. Answers: 1.45 fcu = $1.00. 1.00 fcu = $1.45. 1.45 fcu = $.6897. Correct .6897 fcu = $1.00. - .6897 fcu = $1.00. A put option requires the seller to buy an asset at market price and the buyer of the put option has the option to sell the asset at market. True False - False A U.S. importer that purchased merchandise from a South Korean firm would be exposed to a net exchange gain on the unpaid balance if the dollar weakened relative to the Korean won and the won was the denominated currency. dollar weakened relative to the Korean won and the dollar was the denominated currency. dollar strengthened relative to the Korean won and the won was the denominated currency. dollar strengthened relative to the Korean won and the dollar was the denominated currency. - dollar strengthened relative to the Korean won and the won was the denominated currency At the date the transaction is recognized, the transaction shall be measured and recorded in Answers: the functional currency of the foreign country in which it is denominated. the functional currency of the foreign country in which it is measured. the functional currency of the recording entity. the functional currency of the recording entity by using the exchange rate in effect at that date. - the functional currency of the recording entity by using the exchange rate in effect at that date.