Monson Co., based in the United States, exports products to Japan denominated in yen. If the forecasted value of the yen is substantially ____ than the forward rate, Monson Co. will likely decide ____ the payments.

Question

Quizplus · Accepted Answer

If the forecasted value of the yen is substantially higher than the forward rate, Monson Co. would expect to receive more in dollar terms when the yen is converted back to dollars. Therefore, they might decide not to hedge, as they would benefit from the yen's appreciation.

Monson Co, Based in the United States, Exports Products to Japan