单选题

Epsilon Inc, a U.S. based company, must pay ¥1,000,000,000 to its Japanese component supplier in 3 months. Epsilon approaches a dealer and enters into a USD/JPY currency forward contract, containing a stipulation for physical delivery, to manage the foreign exchange risk associated with the payment to its supplier. Which of these best describes Epsilon’s currency forward contract?

A、 The dealer will deliver yen on expiration.
B、 The amount of USD exchanged for JPY is determined at expiration.
C、 Epsilon may receive or pay JPY, depending on the exchange rate at expiration.

【正确答案】 A

【答案解析】

A is correct because this currency forward contract requires physical delivery; therefore, Epsilon receives 1,000,000,000 JPY from the dealer in exchange for paying USD.