QUESTION: 113

Company W produces mobile phone components and has recently tendered for a substantial contract. The results of the tendering process will not become available until three months from now. If the company is successful it will require 2,000 units of a commodity which is currently traded in an open commodity market for $740 per unit. However, there has been speculation that this commodity could increase substantially in price over the next three months and so the company is considering purchasing the commodity now and storing it for three months. The funds to buy the commodity would be borrowed at an annual interest rate of 7% and the storage cost of the product would be $5.40 per unit per month. The storage costs would be paid at the end of the three month storage period.
Which of the following represents the gain or loss (to the nearest thousand dollars) that will accrue to Company W assuming that the price of the commodity rises to $800 in three months' time?

$62,000 gain
$95,000 gain
$88,000 gain
$16,000 loss

Answer(s): A

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QUESTION: 114

DRAG DROP (Drag and Drop is not supported)

Move the category of risk to the box beside the risk description it best matches.

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Answer(s): A

Explanation:

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QUESTION: 115

DRAG DROP (Drag and Drop is not supported)
Z is a multinational pharmaceuticals company with operations across Europe, America and Asia. It is currently investigating the possibility of setting up a chemical and specialist production facility in South America. This would be a multi $billion investment.
What steps should Z take to manage the following risks in this long term venture.

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Answer(s): A

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QUESTION: 116

DFG's home currency is the D$.

DFG is heavily exposed to the exchange rate between the D$ and the L$, country L's currency. DFG's treasurer has noted the following:
· Inflation has been running at 5% in DFG's home country and 8% in country L · Interest rates are 7% in DFG's home country and 11% in country L · The spot rate is D$1.0000 = L$2.1000 and the three month forward rate is D$1.0 = L$2.1196 Which of the following statements is consistent with these figures?

Interest rates are expected to continue unchanged, but country L's inflation rate will increase in proportion to the inflation rate in DFG's home country.
Interest rates are expected to continue unchanged, but country L's inflation rate will decrease in proportion to the inflation rate in DFG's home country.
Country L's interest rate is expected to decline relative to that of DFG's home country and inflation rates are expected to continue unchanged.
Country L's interest rate is expected to increase relative to that of DFG's home country and inflation rates are expected to continue unchanged.

Answer(s): A

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Free CIMAPRA19-P03-1 Exam Braindumps (page: 29)

QUESTION: 113

QUESTION: 114

Explanation:

QUESTION: 115

Explanation:

QUESTION: 116