ABC company is concerned about its exposure to USD movements and has determined the risk to be beyond their risk appetite. ABC company presently owe suppliers USD 100,000. Their customers owe USD 30,000. The most appropriate risk treatment is?Group of answer choicesAccept the riskPurchase a USD 100,000 forward exchange contact .Purchase a USD 30,000 forward exchange contact .Purchase a USD 70,000 forward exchange contact .

ABC Ltd is listed on the Imaginary Stock Exchange. Its reporting currency is Imaginary Dollars (I$). ABC Ltd has been experiencing some financial troubles lately. However, management believes that this is a temporary phase, and that it will soon return to normal times. Cash flow has been declining for the past two years, and ABC Ltd has been consistently falling behind on contractual payments to suppliers for raw materials. Consequently, the suppliers have sued ABC Ltd over unpaid bills. The court is expected to rule in favour of the suppliers, and ABC Ltd would be liable to pay I$40 million in fines. The management of ABC Ltd argue that there is a low probability of such a ruling, and have not recognised this liability in the books. Assume that the tax rate is 30%.By how much would you adjust net income?

ABC received a loan from  , an Indonesian bank. Identify the risks that ABC hasLiquidity riskCredit riskInterest rate riskCurrency riskAnswer :

As the risk manager in a multinational corporation, you are concerned about the translation risk associated with your Canadian subsidiary and the transaction risk associated with sales and purchases in CAD. The current value of your subsidiary is CAD 400,000. You have purchased a series of CAD forward exchange contracts totaling CAD 600,000. Why did you purchase so much CAD?Group of answer choicesYou are treating both the translation risk and ongoing transaction risksYou made a mistakeThat’s what the risk policy said to doThe CAD seemed undervalued and looked like a good buy

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.

The likelihood that a nation will take control of a publicly traded company is referred to as the:a.market dangerb.cultural hazardc.exchange rate riskd.political risk