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RISK MANAGEMNET

SSadaf4y ago
HELLO SIR THIS QUESTION IS PZK CO FROM KAPLAN KIT With reference to PZK making foreign currency purchases, which of the following statements concerning whether PZK Co should 'lead' or 'lag' in its management of the anticipated receipt is true? A The $ is expected to weaken against the €, so PZK should lead B The $ is expected to weaken against the €, so PZK should lag C The $ is expected to strengthen against the €, so PZK should lead D The $ is expected to strengthen against the €, so PZK should lag THE ANSWER IS C . SIR CAN YOU PLEASE EXPLAIN ME THIS, I REALLY FIND IT CONFUSING SOLVING SUCH QUESTION WEAKINING STRENTHENING OF CURRENCY
John MoffatJohn MoffatTutor4y ago#1
You have not said what currency is the home currency for PZK, and that obviously makes a big difference to the answer. (I do not have the Kaplan Kit but there was a past question question called PZK, although Kaplan must have added it because in the exam question they were receiving the foreign currency rather than paying foreign currency).
SSadaf4y ago#2
home currency is dollar and yes expect to recieve 1200000euro in six month time
SSadaf4y ago#3
in the main scenario it was written they are going to recieve 1200000 euro but in this particular question they asked if they purchase
John MoffatJohn MoffatTutor4y ago#4
If that is indeed what the question says then it would seem that they have made a mistake in the answer. If the $ strengthens against the Euro and if they are paying Euros then the longer they delay payment the fewer $'s they will have to pay and they should therefore lag.
AABDULLAHI4y ago#5
sir, apologies for interfering with this. but, if the home currency is dollars and they are receiving euros, then expected strong dollar will mean low amount of dollars will be received for 120,000 euros than it would have been now. so, i think they should lead and land in the euros now.
SSadaf4y ago#6
thankyou sirr ! i was also thinking their is some mistake
John MoffatJohn MoffatTutor4y ago#7
Abdullah: But if you read what sadafwaheed has written, you will see that he says that for this part of the question it is written that they are paying euros for purchases (not that they are receiving euros). Also that is exactly what I explain in my latest reply.
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