Section B - Case 3: GlobalCart
Scenario: GlobalCart is a UK-based cross-border e-commerce company. Its functional currency is the British Pound (GBP).
GlobalCart imports electronics from the US and exports them to Europe.
The company expects to receive EUR 500,000 in 3 months from European customers.
It also needs to pay USD 300,000 in 6 months to its US suppliers.
Question:
The risk that the GBP value of the EUR 500,000 receipt will fall between now and the settlement date in 3 months is known as what type of risk?
ACCA · Question 27 · Risk Management
Section B - Case 3: GlobalCart
Scenario: GlobalCart is a UK-based cross-border e-commerce company. Its functional currency is the British Pound (GBP).
GlobalCart imports electronics from the US and exports them to Europe.
The company expects to receive EUR 500,000 in 3 months from European customers.
It also needs to pay USD 300,000 in 6 months to its US suppliers.
Question:
GlobalCart decides to hedge the EUR 500,000 receipt using a forward contract.
The current spot rate is EUR/GBP 1.1500 - 1.1540.
The 3-month forward premium is 0.0020 - 0.0015.
What forward rate will the bank offer GlobalCart to sell its Euros?
Answer options:
1.1480
1.1520
1.1525
1.1555
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