CTP · Question #375
(Topic 4) ABC Company, a publicly held U.S. multinational, owns several manufacturing plants in Latin America as well as several ships to transport its products globally. 60% of its sales are from its
The correct answer is C. Implement or adjust single counterparty balance limits.. See the full explanation below for the reasoning.
Question
- (Topic 4)
ABC Company, a publicly held U.S. multinational, owns several manufacturing plants in Latin America as well as several ships to transport its products globally. 60% of its sales are from its euro-based subsidiaries. The company uses various derivative instruments to mitigate exposure to fluctuations in fuel prices and FX rates. The hedging deals are long- term and placed withmany counterparties. ABC Company is also a net borrower and has a syndicated credit facility in place. Which of the following actions to mitigate counterparty risk would MOST benefit the company?
Options
- AEliminate specific AAA rated counterparties.
- BAdopt a third-party custodian for investments.
- CImplement or adjust single counterparty balance limits.
- DAdd to the number of counterparties to increase diversification.
How the community answered
(22 responses)- A14% (3)
- B5% (1)
- C77% (17)
- D5% (1)
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