Please answer question 7

Incorrect Question 7 0 / 20 pts Suppose your company is adamant about (insists on} about selling coffee in Indonesia in 3 months, you should recommend they use derivatives to speculate and thus protect themselves Go ahead and buy, there is no problem Sell and quickly buy again Use derivatives to hedge themselves Do not buy from Indonesia at all You are currently employed in coffee trading company that buys and sells coffee in international markets and they have hired you because of your claim that you understand how the foreign exchange markets work. Your company has preferred purchasing partners in the following 5 countries 1. Brazil (Brazilian Real) 2. Vietnam (Vietnamese Dong) 3. Colombia (Colombian Peso) 4. Indonesia (Indonesian Rupiah) 5. Ethiopia (Ethiopian Birr) These happen to be the top 5 producers of coffee beans in the world. The name of their currencies are enclosed in the corresponding parentheses. The research department of your company has provided you with the following tables. The rst one shows the current exchange rates and what they believe will be the exchange rate in 3 months. The second shows the degree of volatility exhibited by the 5 currencies in the last 6 months, where a higher number implies more uctuation. Table 1: Current Exchange rates and 3 month projections Country Exchange rate Today 3 Month Projection Brazil 3.80 Reals per dollar 4.20 Reals per dollar Vietnam 23,205.35 Dongs per dollar 23,025.00 Dongs per dollar Colombia 3,163.75 pesos per dollar 3,001.25 pesos per dollar Indonesia 14,766.90 Rupiahs per dollar 15,000.00 Rupiahs per dollar Ethiopia 27.82 Birrs per dollar 25.82 Birrs per dollar Colombia 3,163.75 pesos per dollar 3,001.25 pesos per dollar Indonesia 14,766.90 Rupiahs per dollar 15,000.00 Rupiahs per dollar Ethiopia 27.82 Birrs per dollar 25.82 Birrs per dollar Table 2: Exchange rate volatility Country Exchange rate 6 month variation Brazil 12% Vietnam 8% Colombia 36% Indonesia 49% Ethiopia 18% Given your company's interests, you have been asked to use the information above to answer the following questions that are of some concern