Question

Rae feels it is best for her company to pay their foreign supplier in Panama this month even though they will receive product for another six months. She recently learned that the currency in Panama is expected to appreciate and, by paying the supplier now, her company will save money. This is an example of

A) a spot exchange rate contract.
B) a lead strategy.
C) alag strategy.
D) aforecast strategy
E) buying swaps.

Answer 1

Answer: Rae used (D) aforecast strategy to pay for the supplied products of Panama country.

Step-by-step explanation:

The effects of the increase in the money value will always have a considerable effect on imports and exports. It can also lead to decrease the inflation in the foreign markets. Imports become cheaper the exports becomes expensive in nature. Though Rae planned to pay for the supplied products after six months collectively, The sudden expectation of appreciation of the Panama currency has influenced her to pay in advance to the suppliers.

The aforecast strategy is the well-known type of strategies are used by the share market by doing analysis and research on the future face value of all the stocks held by many big shot companies. This can also be scrutinized by the process of import operations lead by all the developing companies who want to buy the products of developed countries that have high value of a currency.