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What is the risk of transaction

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Reference no: EM133316910

As international purchases you have to pay 4 million dollars to your suppliers in USA in four months, The current exchange rate is IS = 10.5MAD.

1. What is the risk of this transaction?

2. How can you explain depreciation of the exchange rate?

3. How would you protect yourself?

4. The FOREX market presents option contract S/MAD with strike rate of IS = 10.5 MAD and premium of 0.5 MAD, the day of the payment the exchange rate is IS = 11MAD, what will you choose?

5. What is the total cost of the purchases?

Reference no: EM133316910

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