1. Which of the following is true of options? (a) The buyer decides if the options will be exercised. (b) The seller decides if the options will be exercised. (c) The seller pays the buyer the option premium. (d) All of the above 2. Currency futures contracts specify a standard volume of a particular currency to be exchanged on a specific settlement date at a specified exchange rate. (a) True                 (b) False 3. A UK-based MNC expects to receive £20,000 from domestic operations and 20,000 Euro (€) from a business in Belgium. If the pound’s value is €1.0959, they expected total cash flow in pound are: (a) £42,000 (b) £41,000 (c) £39,470 (d) £38,250

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.