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 30 · 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:
The current spot rate is GBP 1 = USD 1.2500.
The 6-month interest rate in the UK is 4% per annum.
The 6-month interest rate in the US is 6% per annum.
Using Interest Rate Parity (IRP) theory, what is the theoretical 6-month forward rate? (Round to four decimal places).
Answer options:
1.2262
1.2381
1.2620
1.2740
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