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Identify what transaction risk management is done in the following cases: (A) ABC Corporation will only accept P200,000 or its equivalent on the payment date despite having a USD4,000 sale. (B) ABC Corporation pays a foreign-currency denominated purchase early when it sees that the Philippine peso will decrease in value.
a. Invoicing in home currency; Leading
b. Forward contract; Leading
c. Invoicing in home currency; Lagging
d. Forward contract; Lagging
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- An example of transaction exposure is when Question 4 options: companies have obligations for the purchase of goods at previously agreed prices. companies borrow funds in domestic currency. there is an impact of currency exchange rate changes on the reported financial statements of a company. there is a long-term effect of changes in exchange rates. changing exchange rates persists on future prices, sales, and costsIdentify what transaction risk management is done in the following cases: (A) ABC Corporation will only accept P200,000 or its equivalent on the payment date despite having a USD4,000 sale. (B) ABC Corporation pays a foreign-currency denominated purchase early when it sees that the Philippine peso will decrease in value.* Forward contract; Lagging Forward contract; Leading Invoicing in home currency; Lagging Invoicing in home currency; Leading1. At any given time, the bank will purchase foreign exchange currency at what cost? a. market price b. client's selling price c. lower than the selling price 2. A bond call price amount is a. lower than par value b. higher than par value c. lower than discount value
- ABC Co. expects a payment from an American customer in 30 days. To hedge its currency exposure, ABC Co. shoulda. Sell dollars forward 30 days.b. Buy dollars forward 30 days.c. Sell pesos forward 30 days.d. Do nothing as there is no foreign exchange rate exposure for a 30 day time horizon.Statement I - Exchange rate risk is a factor that contributes to the difficulty of the company to manage its international creditStatement II - A relaxation in collection policy that lengthens the firm collection period ultimately lengthens the firms operating cycle and cash conversion cycle a. False; False b. True; False c. True; True d. False; TrueWhich of the following refers to the money market hedge of a company’s payables (receivables)? 1. A company sells (buys) its foreign currency receivables (payables) forward to eliminate its exchange risk exposure. 2. A company borrows (or lends) in foreign currency to hedge its foreign currency receivables (payables), thereby matching its assets and liabilities in the same currency. 3. A company buys a currency at the place where it is priced cheaper and immediately sells it at the place where it is priced higher. 4. A company buys a foreign currency call (put) option to hedge its foreign currency payables (receivables).
- Al-Rawabi Company is an Omani firm offering different services. However, its main activity focuses on importing goods from Canada. Often, the firm pays its bills in CAD keeping part of its liabilities denominated in this currency. Suppose the spot rate 1 CAD = 0.3030 OMR and the 3-month forward %3D rate is CAD 3.2938/OMR. Specify the risk carried out by this firm. O a. No change in OMR valme O b. No change in CAD value O C. Appreciation of CAD O d. Appreciation of OMRThe entity sold its inventory to a foreign entity with credit term of n/60. On the 60th day from invoice, the entity accepted the $200 payment from a client. It converted this amount on the spot rate. The entity's approach to the foreign exchange risk is A. AvoidanceB. MitigationC. AcceptanceTitle: Identification Things to do: 1. A second function of the foreign exchange market is to provide exchange possibility that unpredicted changes future exchange rates adverse consequences for the firm. insurance against risk, which is the in will have exchange rate is the rate foreign exchange dealer 2. The at which a converts currency into another one currency on a particular day. 3. The value of a is determined by the interaction between the demand and supply of that currency relative to the demand and supply of other currencies. 4. A parties agree exchange occurs to exchange currency when two and execute the deal at some specific date in the future. 5. rates governing such future transactions are referred to as forward exchange rates. 6. Changes in be problematic for an business. exchange rates can international 7. A is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. 8. When a firm enters into a it is taking out possibility…
- 8 - What is the most risky payment method for the exporter company?A) Payment with acceptance creditB) Payment by letter of credit C) Pre-financingD) Cash against goods E) Advance paymentQUESTION 1 In a forfaiting transaction, the forfait buys the notes at a discount from face value from the importer. buys the notes at a discount from face value from the exporter. redeems the notes at a face value to the exporter. Onone of the options QUESTION 2 Depending on the manner in which firms are affected, political risk can be operational and control risk only transfer, operational, and control risk operational and transfer risk only. transfer and operational risk only Click Save and Submit to save and submit. Chick See All Am O Ht redPlease answer both subparts. 1. The following Information should be used for Questions 1 and 2. The treasurer of X wants to hedge an exposure to currency risk. X is a company whose domestic currency is the euro, and the company must make a payment of US $500 000 to a US supplier in 6 months' time. The following market rates are available: Exchange rates: $ per €1 Spot= 1.604 ± 0.002 6 months forward= 1.570 ± 0.004 6 month interest rates: Euro Borrowing= 4.8%. Euro Deposits= 4.4% US dollar Borrowing= 2.5%. US dollar Deposits= 2.0%. What would be the euro cost to X if he hedges through a forward contract? (a) Euro 326, 495 (b) Euro 319, 285 (c) Euro 313, 525 (d) Euro 333, 295 2. What would be the cost to X if he hedges through the money market? (a) USD 634, 631 (b) USD 631, 634 (c) Euro 316, 634 (d) Euro 316, 436