ACCA · Question 18.2 · Risk Management
CASE 3: GLOBALBEAN CO
GlobalBean Co is a coffee exporter based in the US (reporting in USD). The company frequently sells coffee beans to European buyers, invoicing in Euros (EUR). GlobalBean expects to receive EUR 500,000 in three months. The company is concerned about foreign exchange risk and interest rate risk on a floating rate loan it holds.
To hedge the EUR 500,000 receipt using a money market hedge, what is the correct sequence of actions GlobalBean should take today?
Answer options:
Borrow USD, convert to EUR at the spot rate, and deposit the EUR.
Borrow EUR, convert to USD at the spot rate, and deposit the USD.
Deposit EUR, wait three months, and convert to USD at the forward rate.
Buy a EUR call option and sell a USD put option.
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