International Finance

Read the article below and answer the four questions with reasoned qualitative answer:

1. What are the different types of foreign-exchange risk that WMC will encounter?

2. Explain why borrowings in US dollars and forward sales of US dollar revenues by Australian mining companies in the 1980s had backfired.

3. Explain why WMC decided to borrow in a basket of currencies rather than exclusively in US dollars or Australian dollars.

4. Explain why WMC decided not to hedge its economic exposure(i.e., future US-dollar revenues).