ProblemsThere are sets of multiple-choice questionsand missing-word questionsavailable
on the website. These specifically cover the material contained in this chapter. These
can be attempted and graded (with feedback) online.
There is also an additional problem, with solution, that relates to the material
covered in this chapter.
Go to http://www.pearsoned.co.uk/atrillmclaneyand follow the links.‘
Lee is going to avoid transaction risk by using a forward contract.
(a) What cash will change hands and when?
(b) Is the A$ at a forward discount or at a forward premium to sterling?15.4 Precision Parts plc is a UK business that makes a small range of components for cars.
These parts are sold to UK-based manufacturers. The components are made from
steel, bought from a UK manufacturer, which obtains its raw materials from exclus-
ively UK sources.
Explain how Precision Parts plc is exposed to exchange rate risk. What could the busi-
ness do to protect itself from any exchange rate risk to which it is exposed?