You have a business based in Australia that has just imported a product from a seller in Mexico. The invoice for this purchase is denominated in Australian dollars (AUD) and must be paid in 30 days. That is, you will pay for your purchase in AUD.Given this arrangement, what is the exchange-rate risk you face as an importer?Question 12Select one:The risk is that the AUD will weaken against the peso.The risk is that the AUD will strengthen against the peso.You face no exchange-rate risk since you make payments in AUD.Mexico borders the USA so you are exposed to the AUD weakening relative to the USD.

Fill in the Blank QuestionFill in the blank question.Risks and uncertainties associated with exchange rates may discourage the flow of trade.

On 10 January 2016, you observed the following exchange rates: Canada-Australia: C$1.2 = AU$1 Japan-Australia: 120 yen = AU$1 Mexico-Australia: 8 pesos = AU$1 India-Australia: 45 rupees = AU$1 If the exchange rate on January 10, 2017, is AU$1 = 10 Mexican pesos, then: Question 3 Answer a. the Australian dollar has appreciated 20% against the Mexican pesos. b. the Australian dollar has depreciated 20% against the Mexican pesos. c. the Mexican peso has depreciated 10% against the Australian dollar. d. the Mexican peso has appreciated 10% against the Australian dollar.

International trade is more difficult and riskier than domestic trade from the exporter's perspective becauseGroup of answer choicesthe exporter may not be familiar with the buyer, and thus not know if the importer is a good credit risk.if the merchandise is exported abroad and the buyer does not pay, it may prove difficult, if not impossible, for the exporter to have any legal recourse.political instability makes it risky to ship merchandise abroad to certain parts of the world.all of the options

If the Australian dollar appreciates, the effect of this is likely to be that:Group of answer choicesexports will be more expensiveimport-competing domestic goods will be relatively cheaper‘imported disinflation’ may become a benefitimports will be more expensive‘imported inflation’ may become a problem

The current spot exchange rate is AUD 1.00 = USD 0.80. The Australian risk-free rate is 3.0%p.a. compounded continuously, whereas the US risk-free rate is 0.8% p.a. compoundedcontinuously. The no-arbitrage price on a 9-month forward contract written on the exchangerate is likely to bea) USD 0.813 / AUDb) AUD 0.787 / USDc) AUD 1.271 / USDd) AUD 1.230 / USD