Question Two

$(25$ marks$)$

a$)$ The Bank of Botswana $($BoB$)$ has set the following exchange rates for the Botswana Pula against the Australian dollar:

$BW\frac{P}{\text{\$}}=0\mathrm{.}7980-90$

$A\frac{\text{\$}}{\text{\$}}=0\mathrm{.}8613-17$

Required:

i$)$ An Australian firm asks the bank for an A$$/$BWP quote. Determine the cross$-$rate that the bank quote?

$(5$ marks$)$

ii$)$ Suppose the quote on Botswana pula is R$1\mathrm{.}624-31.$ If you converted R$10,000$ to Botswana pula's and then back to rands, establish the amount of rands that you will end up with?

$(5$ marks$)$

b$)$ You've just started working for a newly founded Multinational Corporation in Botswana as a Graduate Trainee in the International Financial Transactions Department. Your department's senior manager has indicated that they are concerned about transaction risk that the organization will be exposed to$.$ You have however highlighted to them that there are several methods of managing exposure to transaction risk.

You are required to prepare a report to senior management that explains at least seven $(7)$ methods that the organization can use to reduce or minimize their exposure to transaction risk.

$(15$ marks$)$