CIPS Exam L5M2 Topic 1 Question 35 Discussion

Actual exam question for CIPS's L5M2 exam

Question #: 35
Topic #: 1

[All L5M2 Questions]

Maple Tree Limited is a Canadian company who has recently signed a new contract with a supplier who is based in Chin

a. Maple Tree Limited will be buying a raw material with a reputation for severe price fluctuations. Which of the following would help mitigate the risk that this poses? Select TWO options

Aquote in the supplier's currency

Bquote in the buyer's currency

Cuse a forward exchange contract

Dfix the exchange rate at the current rate

Show Suggested Answer

Suggested Answer: A

The correct answers are as follows:

CSR= Corporate Social Responsibility

by Lauran at Jun 20, 2024, 07:05 AM

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Muriel

10 days ago

I'd recommend C and D. Seriously, who wants to gamble with raw material prices? Might as well just roll the dice and hope for the best. But that's not how you win at business, am I right?

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Goldie

18 days ago

I'm going to have to go with C and D. Fixing the exchange rate and using a forward contract - that's the way to play it safe in this situation. No need to get fancy, just lock it down.

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Lisandra

20 days ago

I'd go with C and B. Quoting in the buyer's currency could also help stabilize the costs, especially if the supplier's currency is volatile.

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Cecilia

23 days ago

Definitely C - a forward exchange contract! That way, you can agree on a fixed rate upfront and avoid any nasty surprises later on.

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Gracia

4 days ago

I agree, using a forward exchange contract is a good way to mitigate the risk of price fluctuations.

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2 months ago

I think we should quote in the supplier's currency to mitigate the risk.

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