a) i) Petransa has a definite borrowing requirement that it wishes to hedge. Therefore, a future hedge is appropriate as it locks in a rate. The company is exposed to rates from June to December and the futures contract is based on 3-month rates from the delivery date. The company should therefore sell 3 June futures contracts and 3 September contracts. (3 marks)

ii) In this case, Petransa does not know whether it will need to borrow, as this will depend on whether it wins the tender. Therefore, an option hedge is a better alternative as it will give the ability to lock into an interest rate, but should Petransa’s bid be unsuccessful it can allow the option to lapse or it can be sold. To hedge, Petransa should buy 12 put options. (3 marks)

iii) In this situation, either a futures or options hedge could be used. Buying 7 futures contracts would create an offsetting position that effectively locks in a deposit rate. If the period over which there are concerns as to interest rates extends beyond 3 months, 7 contracts will need to be purchased at each relevant delivery month.

The preferred approach is likely to depend on the objectives and attitude to risk of the company and also be influenced by the level of probability it assigns to a dramatic fall in interest rates. (4 marks)

b) Methods of international trade

Open Account: The exporter ships the goods first and receives payment from the buyer at a later agreed date (e.g. 30, 60, or 90 days after shipment). This method is risky to the exporter and should be used only when there is strong trust between parties. Using this method, Taama-Kpanli would ship the goods to the foreign buyer, send an invoice with payment terms, and wait for the buyer to remit payment by the expiration of the credit period.

Letter of Credit (LC): A bank issues an LC to guarantee payment to the exporter on behalf of the buyer, provided that the exporter meets all the terms and conditions of the LC. This method guarantees payment to the exporter while protecting the rights of the foreign buyer to receive the goods and related documents as specified. With an LC arrangement, Taama-Kpanli would ship the goods after ensuring compliance with the LC terms (e.g. correct documentation, shipping deadlines). The bank releases payment to Taama-Kpanli once the required shipping documents are presented and verified.

(2 valid points @ 2.5 marks each = 5 marks)

c) Impact of Digital Transformation on Financial Management Decisions in Ghana  Credit Risk Assessment: AI algorithms analyse alternative data (mobile money transactions, utility payments, social media activity) to evaluate creditworthiness. Ghanaian Impact: Banks like Fidelity Bank use AI to extend loans to SMEs in the informal sector by assessing mobile money repayment histories, reducing default rates by 20–30%.

 Investment Appraisal: AI-driven predictive models forecast market trends and asset performance using real-time data. Ghanaian Impact: Pension funds leverage AI to optimize portfolios by predicting cocoa and gold price volatility, improving ROI by 15%.

 Supply Chain Finance: Blockchain enables transparent, real-time tracking of trade transactions, reducing fraud and delays. Ghanaian Impact: COCOBOD uses blockchain to verify shipments and trigger automatic payments from international buyers, cutting settlement time from 30 days to 24 hours and improving working capital cycles.

 Fundraising & Capital Structure: Blockchain facilitates tokenization of assets (e.g. real estate, commodities), enabling fractional ownership and broader investor access. Ghanaian Impact: Startups like BenBen tokenize land assets, allowing SMEs to raise capital via digital tokens, reducing reliance on high-interest bank loans.