On January 1, 2009, Company X Signs an Agreement to Import

Multiple Choice

On January 1, 2009, Company X signs an agreement to import 100 pounds of coffee from Company Y on April 1, 2009 at a price of $5.00 per pound.On April 1, 2009, the market price of coffee is $6.00 a pound.Instead of having to pay $6.00 a pound for coffee, the importer needs to pay $5.00.However, the importer's gain is the exporter's loss.The exporter must now sell 100 pounds of coffee at only $5.00 per pound even though it could have sold it in the open market for $6.00 per pound if it had not signed the agreement.The above is an example of a(n) :

A) forward contract.
B) absolute return.
C) forward exchange rate.
D) Swap agreement.
E) internal forward rate.