If a company has a EUR 100 000 account payable in three months and it expects the AUD to appreciate by the time of payment,a reasonable strategy would be to:
A) lag the payment cash flow.
B) borrow the present value of EUR 100 000 and do a money market hedge in the Australian market.
C) enter into a forward exchange contract to sell euros in three months' time.
D) lead the payment cash flow.

Question

Quizplus · Accepted Answer

Leading the payment cash flow means paying the account payable earlier, which would be beneficial if the AUD is expected to appreciate, as it would cost less in AUD terms to settle the EUR 100,000 payable now rather than later.

If a Company Has a EUR 100 000 Account Payable