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CIPS L5M2 Exam - Topic 1 Question 35 Discussion

Maple Tree Limited is a Canadian company who has recently signed a new contract with a supplier who is based in China. Maple Tree Limited will be buying a raw material with a reputation for severe price fluctuations. Which of the following would help mitigate the risk that this poses? Select TWO options
A) quote in the supplier's currency
B) quote in the buyer's currency
C) use a forward exchange contract
D) fix the exchange rate at the current rate

CIPS L5M2 Exam - Topic 1 Question 35 Discussion

Actual exam question for CIPS's L5M2 exam
Question #: 35
Topic #: 1
[All L5M2 Questions]

Maple Tree Limited is a Canadian company who has recently signed a new contract with a supplier who is based in Chin

a. Maple Tree Limited will be buying a raw material with a reputation for severe price fluctuations. Which of the following would help mitigate the risk that this poses? Select TWO options

Show Suggested Answer Hide Answer
Suggested Answer: A

The correct answers are as follows:

CSR= Corporate Social Responsibility


by Lauran at Jun 20, 2024, 07:05 AM

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Annamae
9 months ago
Wait, can price fluctuations really be that severe?
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In
9 months ago
Definitely agree on the forward contract!
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Lang
10 months ago
Not sure if fixing the exchange rate is the best idea.
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Flo
10 months ago
I think quoting in the buyer's currency is safer.
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Isabelle
10 months ago
Using a forward exchange contract is a smart move!
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Staci
10 months ago
I feel like both fixing the exchange rate and using a forward exchange contract would be solid strategies, but I need to double-check which two options are best.
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Fernanda
11 months ago
I practiced a similar question where quoting in the supplier's currency was mentioned as a risk factor. I wonder if that's still relevant in this scenario.
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Corrinne
11 months ago
I think using a forward exchange contract is definitely a good choice to lock in prices, but I can't recall if fixing the exchange rate is the same thing.
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Catarina
11 months ago
I remember discussing how quoting in the buyer's currency could help reduce exposure to exchange rate fluctuations, but I'm not sure if it's the best option here.
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Arlette
11 months ago
I'm a bit confused by the wording of this question. Does "mitigate the risk" mean reducing the impact of price changes, or completely eliminating the risk? I want to make sure I understand the objective before I choose my answers.
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Pearly
11 months ago
Okay, I think I've got it. Using a forward exchange contract and fixing the exchange rate at the current rate would both help stabilize the costs and reduce the impact of price fluctuations. Those seem like the best two options to select.
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Daron
11 months ago
Hmm, this is a tricky one. I'm not entirely sure about the differences between quoting in the supplier's currency versus the buyer's currency. I'll need to think that through a bit more.
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Talia
11 months ago
This question seems straightforward - we need to identify two options that would help mitigate the risk of price fluctuations for the raw material. I'll start by considering each option carefully.
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Nan
11 months ago
I'm a bit confused by the wording of these options. I'll need to re-read them a few times to make sure I understand the nuances.
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Fatima
11 months ago
Okay, let me see. The sales comparison approach is all about looking at recent sales of similar properties to determine the value of a subject property. I think the key economic principles here are supply and demand, since that drives the prices of those comparable sales. I'll go with option D.
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Muriel
1 year ago
I'd recommend C and D. Seriously, who wants to gamble with raw material prices? Might as well just roll the dice and hope for the best. But that's not how you win at business, am I right?
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Sarah
1 year ago
Agreed, taking calculated steps is key to success in business.
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Gladys
1 year ago
Absolutely, it's all about making smart decisions to protect the company's bottom line.
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Melvin
1 year ago
Using a forward exchange contract and fixing the exchange rate can definitely help with that.
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Ena
1 year ago
I agree, it's important to mitigate risks when dealing with price fluctuations.
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Goldie
1 year ago
I'm going to have to go with C and D. Fixing the exchange rate and using a forward contract - that's the way to play it safe in this situation. No need to get fancy, just lock it down.
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Phuong
1 year ago
I'm not sure about quoting in the supplier's currency, but fixing the exchange rate at the current rate definitely sounds like a good idea.
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Craig
1 year ago
I think quoting in the buyer's currency could also help stabilize the price fluctuations.
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Yvette
1 year ago
I agree, using a forward exchange contract and fixing the exchange rate seems like the safest option.
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Lisandra
1 year ago
I'd go with C and B. Quoting in the buyer's currency could also help stabilize the costs, especially if the supplier's currency is volatile.
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Cecilia
1 year ago
Definitely C - a forward exchange contract! That way, you can agree on a fixed rate upfront and avoid any nasty surprises later on.
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Edelmira
1 year ago
I would go with both A) quote in the supplier's currency and C) use a forward exchange contract to cover all bases.
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Tashia
1 year ago
I think fixing the exchange rate at the current rate could also be helpful in this situation.
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Gracia
1 year ago
I agree, using a forward exchange contract is a good way to mitigate the risk of price fluctuations.
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Candra
1 year ago
Hmm, I think C and D would be the best options to mitigate the risk of price fluctuations. Locking in the exchange rate is a smart move.
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Rene
1 year ago
Yes, those options would provide some stability in the face of price fluctuations.
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Ellsworth
1 year ago
I agree, using a forward exchange contract and fixing the exchange rate would definitely help manage the risk.
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Cassi
1 year ago
I think fixing the exchange rate at the current rate would be the best option to avoid any surprises.
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Bettye
1 year ago
I agree with Raelene, but we should also use a forward exchange contract for added protection.
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Raelene
1 year ago
I think we should quote in the supplier's currency to mitigate the risk.
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