An australian company, X, currently exports bulk of its production to a Malaysian company under a fixed AUD pricing arrangement with settlement terms 180 days after delivery. Given that movements in the AUD and commodity prices have traditionally been highly correlated, what is the primary risk faced by X in respect of these exports and explain why? (a) Credit Risk (b) Liquidity Risk (c) Interest Rate risk (d) Commodity price rise

An australian company, X, currently exports bulk of its production to a Malaysian company under a fixed AUD pricing arrangement with settlement terms 180 days after delivery. Given that movements in the AUD and commodity prices have traditionally been highly correlated, what is the primary risk faced by X in respect of these exports and explain why? (a) Credit Risk (b) Liquidity Risk (c) Interest Rate risk (d) Commodity price rise

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 43QA

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