why a organisation should consider hedging net payables or net receivables with currency options rather than: forward contracts, and  future contracts.

Q: Which of the following is not classified as a financial instrument? Convertible bond C. Loan…

A: Solution: "Warranty provision" is not classified as a financial instrument.

Q: What is National Savings Certificate? A. Short-term U.S. government debt obligation B. A fixed-…

A: The correct answer is B. A fixed-income investment scheme:One such investment product that the…

Q: Indirect Intervention How can a central bank use indirect intervention to change the value of a…

A: Central bank can use indirect intervention to change the value of the currency by making necessary…

Q: How do the central banks implement expansionary monetary policy using monetary policy tools?…

A: Solution Step (1) Expansionary Monetary Policy The expansionary fiscal policy works by increasing…

Q: Government policies relating to the national debt and barriers to trade do not impact the demand and…

A: A equilibrium value of one monetary system conveyed in another currency's value is referred to as an…

Q: discuss the motives a company may have for engaging in currency and intrest rate swaps

A: A swap is a two-party derivative transaction that includes the exchange of pre-agreed cash flows. It…

Q: Which one of the following is not true regarding a currency board? Currency board holds…

A: Currency board is one of the way to manage the exchange rate and foreign currency and supply of…

Q: What are the differences in accounting for a forward contract used as a cash flow hedge of (a) a…

A: Cash flow hedge of a foreign currency denominated asset or liability: For a cash flow hedge of a…

Q: State the different types of foreign exchange risk that can be hedged and how foreign currency…

A: Different types of foreign exchange risks: Transaction risk Translation risk Economic risk

Q: What is the current market view on USD/JPY? (Will it appreciate and which depreciate? and why?)

A: USD/JPY will be reflecting the exchange rate of Japanese currency with respect to 1 American dollar.…

Q: Discuss the concept of functional currency under SFAS No. 52. What purpose does the functional…

A: Statement of financial accounting standard number 52 is the one which is amended from time to time…

Q: What is the rationale for the remeasurement of foreign currency transactions?

A: Remeasurement: Remeasurement refers to re-evaluation of a physical asset or foreign currency in the…

Q: 2. How fixed exchange rate system of UAE is managed? Show this for both surplus and deficit balance…

A: The exchange rate system explains how the exchange rate determines in respect of the other nation's…

Q: How can they say that the currency is portable, durable, divisible, and fungible ?? (Kindly…

A: Currency is a medium of exchange for goods and services. In short, it's money, in the form of paper…

Q: Illustrate how to synthesize a forward hedging strategy by using only the money markets, in order to…

A: The idea of forward hedging is to lock-in the price (or exchange rate) today for a future foreign…

Q: Consider risk mitigation strategies while analyzing foreign financial statements

A: Subclass of business analysis, FS analysis evaluates a company's business environment, strategy,…

Q: Which of the following is part of the payments system of the economy? A. currency B. demand deposits…

A: A payment system is any mechanism that settles banking transactions by transferring monetary value.…

Q: Describe the trade-offs of extending credit.

A: Accounts receivable: Accounts receivable refers to the amounts to be received within a short period…

Q: Compare and contrast transaction exposure and economic exposure

A: SOLUTION:- Transaction exposure is the danger a MNC faces when it executes a particular exchange…

Q: Explain why a country under monetary unions do not have assess to monetary policy

A: A monetary union is group of different nations coming together to accept a common currency to be…

Q: What is the difference bet

A: There are many types of traders in the market and each trader has their own objective in the market…

Q: What is a Letter of Credit? Please discuss how a Letter of Credit work. Why is Letter of Credit…

A: What is a Letter of Credit A letter of credit, sometimes known as a "credit letter," is a guarantee…

Q: 21. What is the upside of utilizing cash in exchange as thought about to deal exchange?

A: The foreign exchange market deals with currency in different countries. It includes the exchange of…

Q: how can washington Mutual manage their interst rate risk

A: Washington Mutual, a former U.S. bank, faced serious challenges in managing interest rate risk due…

Q: Define each following terms: p. American depository receipts (ADRs); repatriation of earnings

A: “Since you have asked multiple questions, we will solve the first question for you. If youwant any…

Q: what's the required condition for a country's Current Acoount Balance to improve after the…

A: Current account deficit is implies the value of imports of (goods/services/investment incomes) is…

Q: Trade and other payables includes what?

A: The balance sheet is the financial statements of the business that show the assets and liabilities…

Q: Problem : How are revenues related to current assets? In regards to exchange rates, what's the…

A:

Q: What are the consequences of accounting for foreign currency translation on financial statement…

A: Introduction:   According to IAS 21, if an entity has an activity in a foreign nation, its financial…

Q: what are some of the ethical pros and ethical cons concerning a conversion to Central Bank Digital…

A: Let's explore the ethical pros and cons of transitioning to Central Bank Digital Currency (CBDC):…

Q: Financial Institutions have Off-Balance-Sheet acitivities mainly (Commitment Loans; Letter of…

A: Potential Advantages: 1. Off-balance-sheet activities can help financial institutions reduce their…

Q: Why is granting credit riskier in an international context?

A: The term credit refers to selling goods on credit by the business top its customers i.e. instead of…

Q: Explain about the hedging against the foreign currency risk.

A: Foreign exchange refers to the trading of currency of one country with the currency of another…

Q: Discuss the primary differences between U.S. GAAP and IFRS with respect to cash and receivables.

A: GAAP (Generally Accepted Accounted Principles) is a rule-based concept. On the other side, IFRS…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.