Question: ANC Is A Ghanaian Based Company Engaged In Manufacturing Of Fast Moving Consumer Goods (FMCG) Has Recently Imported Raw Materials From France With An Invoice Value Of US$3,500,000 Payable In Three Months’ Time. Due To The Company’s Efficient Production Capacity, It Has Finished Production And Exported Finished Products To Italy. Consequent To This, …

businessfinancefinance questions and answersANC Is A Ghanaian Based Company Engaged In Manufacturing Of Fast Moving Consumer Goods (FMCG) …Question: ANC Is A Ghanaian Based Company Engaged In Manufacturing Of Fast Moving Consumer Goods (FMCG) Has Recently Imported Raw Materials From France With An Invoice Value Of US$3,500,000 Payable In Three Months’ Time. Due To The Company’s Efficient Production Capacity, It Has Finished Production And Exported Finished Products To Italy. Consequent To This, …This problem has been solved!See the answerANC is a Ghanaian based company engaged in manufacturing of fast
moving consumer goods (FMCG) has recently imported raw materials
from France with an invoice value of US$3,500,000 payable in three
months’ time. Due to the Company’s efficient production capacity,
it has finished production and exported finished products to Italy.
Consequent to this, the Italian Customer has been invoiced for
US$5,500,000 payable in three months’ time.

Below is the current spot and forward rates for the
transactions:
Spot GHS/ US$ 5.7250 — 5.7325
Three-month forward rate GHS/ US$ 5.6945 — 5.7025
Current Money Market rates per annum are as follows:
Deposit Borrow
US$ three month interest rate might be quoted as: 0.11 0.132
GHȻ three month interest rate might be quoted as: 0.125
0.1475
Required:
Evaluate the main sources of financial risk for ANC [ 6
marks]

Demonstrate with relevant calculations how the ANC, the Ghanaian
Company, can hedge its exposure to foreign exchange risk using,
advice ANC’s finance director as to which of the hedging strategies
he/she should adopt.

α)The Forward Markets [3 marks]
β) Enumerate three (3) strategies for managing foreign currency
risk [6 marks]
Expert Answer Sources of Financial Risks Interest Rate Risk: Interest rate risk is the variability in a securitys return resulting from changes in the level of interest rates. Other things being equal, securiview the full answer