A finished BUS-390 Topic 4 transaction exposure analysis example, following one peso invoice from quote to cash and repricing the margin at two rates. Searches like "bus 390 topic 4 assignment example", "bus390 topic 4 sample" and "bus-390 topic 4 example" land here.
What a finished BUS-390 Topic 4 transaction exposure analysis looks like
The example is a timeline with a margin attached. A quote priced in pesos is signed at an illustrative rate of 18.0 to the dollar, delivery follows sixty days later and the buyer pays ninety days after that, so the firm carries the exposure for five months without ever having placed a bet. Revenue of 3.6 million pesos is worth 200,000 dollars at signing against dollar costs of 170,000. If the peso slides to 19.5, still an illustrative figure, the same invoice brings in about 184,600 dollars and half the margin is gone. Four responses are then priced: invoicing in dollars, a forward contract at an illustrative 18.6, buying a component from a Mexican supplier to offset part of the exposure, and simply accepting the risk.
How a BUS-390 Topic 4 example is structured
The paper follows the order through time and puts a dollar figure at each stop. It opens with the contract terms that create the exposure: the invoicing currency, the delivery date and the payment terms. A timeline then marks the three moments that matter, signing, delivery and settlement, and the rate assumed at each, all labeled illustrative. The margin is recalculated at two plausible rates at settlement, which turns an abstract risk into a figure a finance manager recognizes. Transaction exposure is then separated briefly from the translation and economic kinds, so the reader knows which one this paper concerns. Four responses follow, each with its cost and what it leaves uncovered. The paper closes by recommending the forward for this order and a peso-denominated component purchase for the following year's orders, with the reasoning for splitting the answer in two.
Terms that create the exposure
Invoicing currency, delivery date and ninety day payment terms are quoted from the contract, since the exposure lives in those three clauses.
Five months from quote to cash
Signing, delivery and settlement are marked on a timeline, each with an illustrative rate, so the exposure period has a visible length.
The same invoice at two rates
At 18.0 the order earns 30,000 dollars and at 19.5 it earns about half that, which is the whole argument in two lines.
Four responses, each priced
Dollar invoicing, a forward, a peso-denominated supplier and doing nothing are each costed and checked for what they leave uncovered.
A split recommendation defended
The forward protects this order while a local component purchase shrinks exposure on future orders, and the example explains why both are needed.
Where marks go in BUS-390 Topic 4
Credit drains fastest from papers that discuss exchange rates as a market to forecast, since the firm in this topic never chose to take a position. Exposure described without the contract terms that create it cannot be measured, because the invoicing currency and payment period are the exposure. Writers who calculate a loss at one rate but never show the margin before and after leave a reader unsure whether the loss matters. Mixing transaction exposure with translation exposure, which arises only when a foreign subsidiary's accounts are consolidated, confuses two separate problems. Hedges recommended with no cost attached look free, and a forward that locks in a weaker peso than today's rate has a price. Papers treating dollar invoicing as the obvious fix overlook that the buyer may take the order elsewhere.
Get a BUS-390 Topic 4 example written to your instructions
Send the BUS-390 Topic 4 instructions, your classroom rubric and any company, currency pair or contract your section provided. A custom example is written to those criteria, tracing the exposure from contract terms to settlement, recalculating the margin at more than one rate and pricing each hedge, ready in 24 to 48 hours. The first one is free.
BUS-390 Topic 4 questions, answered
Does a firm with no foreign operations have currency exposure?
Often, yes. A firm that sells abroad in the buyer's currency, or buys inputs priced in another currency, carries exposure from the day a price is agreed until the day cash changes hands. No foreign office is needed. The exposure is written into the invoicing and payment terms, which is why the example starts with the contract.
Which hedge should the paper recommend?
The one whose cost fits the size and timing of the exposure. A forward suits a single known receivable; an option costs more and keeps the upside; a natural hedge, such as buying inputs in the same currency, works across many orders rather than one. Many strong papers recommend different tools for different horizons and say why.
Do I need real exchange rates?
Not unless the instructions require them. Illustrative rates are fine when labeled, and they often make the arithmetic clearer. If real rates are used, cite the source and the date, since rates move daily. What faculty look for is the margin recalculated at more than one rate, which shows the exposure is understood rather than merely named.