CPPC is a Ghanaian cocoa processing company that exports cocoa butter to South Africa. CPPC bills its client in South Africa in South African rands $($ZAR$),$ the South African currency. CPPC is due to receive five million rands in $90$ days for a consignment just shipped to South Africa. The spot rate today is GHS$(0\mathrm{.}3165)/($Z$)$AR$.$

Descriptive statistics of the percentage changes in the quarterly exchange rates for GH$($S$)/($Z$)$AR are given below:

Minimum quarterly percentage changes $=-16\mathrm{.}4\%$

Maximum quarterly percentage changes $=12\mathrm{.}6\%$

Average quarterly percentage change$=0\mathrm{.}9\%$

Standard Deviation of quarterly percentage changes$=4\mathrm{.}6\%$

Likelihood of the ZAR appreciating against the cedi$=60\mathrm{.}2\%$

Likelihood of the ZAR depreciating against the cedi $=38\mathrm{.}5\%$

i$.$ Provide a qualitative description of CPPS$$s exposure.

ii$.$ If CPPC chooses not to hedge this exchange rate risk, what is CPPC$$s expected revenue in cedis from the consignment just shipped?

iii. If CPPC does not hedge, what is the range of possible cedi receivable of the five million rands due, with $95\%$ probability $($i$.$e$.$ within two standard deviations of the expected cost$)?$

iv$.$ Recently, the South African rand has been depreciating against the cedi raising concerns on its impact on CPPC$$s cash flows. At a recent meeting of the Board of Directors, the Technical Director of CPPC argued that the current system of invoicing exports in the client$$s currency exposes CPPC to high exchange rate risk and suggested that CPPC should consider invoicing its exports in Ghana cedis.

Evaluate the validity of the Technical Director$$s suggestion that CPPC should invoice its exports in cedis.