A) Three main financial risk faced by AQM fellowship First financial risk faced by AQM Company is change in the price of bulls eye. In the chart present that in the past five year the price of slovenly person has been very volatility. Which in that location were sharp downward in closing curtaining quarter of December 2008 then the price of copper has slow down pick up from bottom low with a popular increasing trend until second quarter of 2011. Based on the chart, AQM management is reasonable confident about that the price of copper in the future will remains stable and there may require possibility that the price of copper may has a sharp decline in response of the skepticism event in the future years. Therefore there was a risk word picture by that company. If there was out of expect which the price of copper decline in the future. This would lead to detriment in profit for that company. Second financial risk exposure by the company is interest rates risk in United States. In this AQM company has extent to its mining facilities and the gimmick cost of a new copper smelter was totaling in US$750 million and priced at US$ dollar LIBOR+2.5%. soon the low level of US interest rates has non been fit by the US Federal Reserve yet AQM management believe that Fed may have to flake to rise the interest rates in future to indifferent(p) monetary setting.
For the third financial risk is foreign replacement rate between Australian dollar and US dollar. When Australian dollar depreciates, it indicates that the price of copper is lower comp ared to other export countries. Importers pay less and get more. However based on the AQMs forecasting if there is rebound at the end November this will make loss of the company, which indicates the Australian dollar appreciates, office importers pay more and will cause AQMs export to decline due to the strong competition with Asian competitors whose currencies are linked to the US dollar. This is the currency risk which AQM will have to bear. B) Whether to hedge...
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