1. A U.S. company is going to receive Euro 1M in 3 months. Which change of the exchange rate of Euro against USD is favorable to the co.?

a. Depreciation of Euro against USD.

b. Appreciation of Euro against USD.

c. Depreciation of USD against Euro.

d. Appreciation of USD against Japanese Yen (JPY).

2. Which of the following statement is FALSE about the difference of speculators and hedgers when both use derivatives?

a. speculators start with naked position on the underlying assets.

b. hedgers have pre-determined position to receive or to pay underlying assets in the future.

c. Hedgers take short position on the futures contract or buy put option on the underlying asset when they are going to receive the underlying asset in the future.

d. Speculators take short position always.

3. Suppose you are going to receive a unit of underlying asset (e.g. 10 ounces of Gold or Euro 100,000) in a year. The price of the underlying asset is volatile, and you want to receive a certain minimum dollar amount when you receive a unit of underlying asset in a year regardless of the price in one year. What can you do now?

a. Buy a call option (the right to buy the underlying asset in the future).

b. Buy a put option (the right to sell the underlying asset in the future).