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 29 · 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's finance director is comparing exchange-traded currency futures with over-the-counter (OTC) currency options.
Which TWO of the following statements are correct?
Answer options:
Futures contracts are standardized in size and maturity date.
Options require the payment of an upfront premium.
Futures contracts give the buyer the right, but not the obligation, to exchange currency.
OTC options are traded on a formal, centralized exchange.
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