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 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 company’s interests, you have been asked to use the information above to answer the following questions that are of some concern

A. Suppose your company decides to ignore volatility and wants to sign a contract today that allows them to buy coffee from these countries in 3 months, which country or countries would you recommend they buy from?(ONLY ONE OPTION IS CORRECT)

Brazil Only

Vietnam Only

Colombia Only

Brazil and Vietnam

Brazil and Ethiopia

Vietnam, Colombia and Ethiopia

Brazil and Indonesia

Indonesia Only

Ethiopia only

Colombia and Ethiopia

B. Suppose your company decides to ignore volatility and wants to sign a contract today that allows them to sell coffee to one or more of these countries in 3 months, which country or countries would you recommend they sell to?(ONLY ONE OPTION IS CORRECT)

Colombia and Ethiopia

Colombia Only

Vietnam Only

Brazil, Ethiopia and Vietnam

Brazil and Ethiopia

Ethiopia only

Brazil, Colombia and Indonesia

Vietnam, Colombia and Ethiopia

Indonesia Only

Brazil Only

MUST NEED SPECIFIC REASON

Answer rating: 100% (QA)

A Your company wants to buy coffee after 3 months for the lowest possible cost Ignoring volatility y... View the full answer