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 Brazil (Brazilian Real) Vietnam (Vietnamese Dong) Colombia (Colombian Peso) Indonesia (Indonesian Rupiah) 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 first 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 fluctuation 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 Table 2 Exchange rate volatility Country Exchange rate 6 month variation Brazil 12 Vietnam 8 Colombia 36 Indonesia 49 Ethiopia 18 Given your companys interests, you have been asked to use the information above to answer the following questions that are of some concern A Suppose your company buys 10,000 pounds of coffee for 3 8 Million Reals today These 10,000pounds have been marked for sale in Ethiopia in 3 months regardless of market conditions, how much more or less are these pounds of coffee worth to your company in 3 months For this question, assume that no profit is made from selling at a higher price, i e prices in both time periods and in both countries are the same (ONLY ONE OPTION IS CORRECT) The value does not change, it is still 10,000 pounds of coffee It is worth $77,459 33 less it is worth 3,526,815 24 Birrs less it is worth 3,526 815 24 Birrs more It is worth $28,000 less it is worth $1,000,000 less it is worth $1,000,000 more It is worth $28,000 more it is $77,459 33 more B Suppose your company has an option that gives them the right to sell $1 for 5 Reals in 3 months, what would you recommend your company do with the option (ONLY ONE OPTION IS CORRECT) Use the option and buy coffee in Brazil Throw the option away as it is not useful use the option and sell coffee in Brazil Do not use the option, but buy coffee in Brazil Do not use the option but sell coffee in Brazil MUST NEED SPECIFIC REASON

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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

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

Brazil (Brazilian Real)
Vietnam (Vietnamese Dong)
Colombia (Colombian Peso)
Indonesia (Indonesian Rupiah)
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 first 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 fluctuation.

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

Table 2: Exchange rate volatility

Country	Exchange rate 6 month variation
Brazil	12%
Vietnam	8%
Colombia	36%
Indonesia	49%
Ethiopia	18%

Given your companys interests, you have been asked to use the information above to answer the following questions that are of some concern

Suppose your company buys 10,000 pounds of coffee for 3.8 Million Reals today. These 10,000pounds have been marked for sale in Ethiopia in 3 months regardless of market conditions, how much more or less are these pounds of coffee worth to your company in 3 months? For this question, assume that no profit is made from selling at a higher price, i.e. prices in both time periods and in both countries are the same. (ONLY ONE OPTION IS CORRECT)

The value does not change, it is still 10,000 pounds of coffee

It is worth $77,459.33 less

it is worth 3,526,815.24 Birrs less

it is worth 3,526.815.24 Birrs more

It is worth $28,000 less

it is worth $1,000,000 less

it is worth $1,000,000 more

It is worth $28,000 more

it is $77,459.33 more

Suppose your company has an option that gives them the right to sell $1 for 5 Reals in 3 months, what would you recommend your company do with the option?(ONLY ONE OPTION IS CORRECT)

Use the option and buy coffee in Brazil

Throw the option away as it is not useful

use the option and sell coffee in Brazil

Do not use the option, but buy coffee in Brazil

Do not use the option but sell coffee in Brazil

MUST NEED SPECIFIC REASON