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HELLO SIR
THIS QUESTION IS PZK CO FROM KAPLAN KITWith 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 lagTHE ANSWER IS C . SIR CAN YOU PLEASE EXPLAIN ME THIS, I REALLY FIND IT CONFUSING SOLVING SUCH QUESTION WEAKINING STRENTHENING OF CURRENCY
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).
home currency is dollar and yes expect to recieve 1200000euro in six month time
in the main scenario it was written they are going to recieve 1200000 euro but in this particular question they asked if they purchase
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.
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.
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