An importer who must pay in three months would hedge by _____ the foreign currency forward. The importer is concerned with _____ of the foreign currency.Group of answer choicesbuying; a depreciationselling; an appreciationbuying; an appreciationselling; a depreciation

Your organization has a transaction risk related to USD sales receipts. The organization's risk policy requires that all foreign currency exposures are hedged. Hedging a foreign currency transaction exposure means that you have:Group of answer choicesReduced the probability of foreign currency fluctuationsReduced the standard deviation of the foreign currency.Reduced the consequence of foreign currency fluctuationsReduced the foreign currency risk appetite

Forwards, futures and options are examples of derivatives that can be used to hedge against foreign currency risk exposure. Group of answer choicesTrueFalse

Question 1 (12 marks) Imagine you are the treasurer of a NZ company exporting dairy products to the United States. All revenues are received in USD and all other expenses (e.g., R&D costs, costs of employees etc.) are incurred in NZ dollars. Required: (a) Discuss whether you need to hedge the foreign exchange risk and factors you need to consider when designing contracts to hedge the risks. (6 marks) (b) If the company is able to raise the price of its product in USD if NZD appreciates without affecting the sales volume, how would you adjust your recommendation in part (a) and sell your strategy to other executives? (6 marks) Provide a typewritten answer to (a) and (b) in no more than one-half (1/2) of a page in total. Hint: If the company is able to raise the price of its product in USD if NZD appreciates, what does it tell you about the company’s foreign exchange exposure? Which derivative security (securities) could be used to hedge this risk? There is no model answer to this question, you just have to provide reasoned explanations.

The FOREX offers importers with ______ to improve the flow of goods and services between countriesa.low interest ratesb.high interest ratesc.short term loansd.long term credit

Consider an exporter who is to receive a payment of USD10 million three months from now. The current spot exchange rate is AUD/USD0.6895 - 0.6995 and the three months forward rate is AUD/USD0.7095 - 0.7100. In 3 months time the spot rate is 0.7150. If the exporter decides not to hedge its exchange rate risk by taking out a forward cover, what is the AUD amount to be received in six months?Group of answer choicesAUD 14 084 507AUD 14 295 926AUD 14 094 433AUD 13 986 014