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INB 205 Wk 8 CheckPoint - Chapter 20 Questions - 25 of 25

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Axia College Material
Appendix D
Your response indicates that you have good knowledge of what organizational
design is and why it is important for companies that do business internationally
as well as options for raising capital in an international business setting. Good
analysis.
GRADE: 25/25.
Chapter 20 Questions
Answer each of the following questions.
1. Why is an exporter that is to be paid in six months in a foreign currency worried
about fluctuating foreign exchange rates?
The exporter would worry about fluctuating foreign exchange rates if they are to be paid
in six month because they could lose money. If the currency they are to receive payment
in drops in value the exporter could face a monetary losses when they convert it back to
their own currency.
2. Are there ways in which this exporter can protect itself? If so, what are they?
Exporters can protect themselves by agreeing to an agreed exchange date with a Spot
Exchange rate, non deliverable forward contracts, forward contract, or window forward
contract. This allows the exporter to freeze the currency at a determined point. This
guarantees that even if the exchange rate fluctuates negatively the exporter will receive
payment at the exchange rate on the day the product was sold.
3. How does the credit or money market hedge work?
This happens when borrowing or lending transactions are in foreign currencies. This
locks the home currency value of a foreign currency transaction.
4. Why is acceleration or delay of payments more useful to an IC than to smaller,
separate companies?
This takes money from the weaker currencies into the stronger currencies and results in a
better rate of return.
5. How would you accomplish exposure netting with currencies to two countries that
tend to go up and down together in value?
INB 205

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