The introduction of floating rates of exchange has substantially increased the demand by international traders and investors for forward cover to protect themselves against extreme fluctuations. Since it is usually difficult for them to pinpoint the exact date on which the payment will be required or the earning will be received, banks are often called upon to provide option forward contracts. It should be made clear that the option granted by the bank to its customers is an option only to the date of delivery within the contracted period and that such contract must be satisfied by the last date of the option period. The foremost consideration for the bank in pricing an option forward contract must be that of protecting it against the possibility that the delivery will be called for at the most inopportune time during the option period. In the case of a ’buyer’s option’, where forwards are dealt at a discount, the bank (the seller) must assume that the delivery will be taken on the first day of the option, so spot rate will be quoted and no discount will be allowed. Should the forward rate be at a premium, the bank should assume that the delivery will not be made until the last date allowable under the terms of the option forward contract, so the forward price will be the sum of the spot rate plus the corresponding premium. In the case of a ’seller’s option’ contract, the bank will be the buyer the opposite should be exactly assumed. In both cases, the bank must allow the smallest discount or charge the highest premium consistent with market rates for its protection.
　　76. International traders and investors use forward cover to protect themselves from _________.
　　A. fixed rate
　　B. floating rate
　　C. forward contract
　　D. option contract
　　77. You can use option forward contracts to choose favorite _________ for yourself.
　　A. date
　　B. price
　　C. currency
　　D. customer
　　78. In the bank’s eyes the most important factor which should be pay attention to is ___________ in pricing forward contract.
　　A. the customer
　　B. the sum of the contract
　　C. the currency
　　D. delivery at the most inopportune time
　　79. In the case of a ’buyer’s option’, if forwards are dealt at a discount, the customer can deliver on ________ in his favor.
　　A. the first day
　　B. the second day
　　C. the last day
　　D. any day
　　80. In the case of a ’buyer’s option’, if forwards are dealt at a premium, the customer can deliver on _________ in his favour.
　　A. the first day
　　B. the second day
　　C. the last day
　　D. any day

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