If Salerno Inc. desires to lock in a minimum rate at which it could sell its net receivables in Japanese yen but wants to be able to capitalize if the yen appreciates substantially against the dollar by the time payment arrives, the most appropriate hedge would be:
A) a money market hedge.
B) a forward sale of yen.
C) purchasing yen call options.
D) purchasing yen put options.
E) selling yen put options.

Question

If Salerno Inc. desires to lock in a minimum rate at which it could sell its net receivables in Japanese yen but wants to be able to capitalize if the yen appreciates substantially against the dollar by the time payment arrives, the most appropriate hedge would be:​
A) ​a money market hedge.
B) ​a forward sale of yen.
C) ​purchasing yen call options.
D) ​purchasing yen put options.
E) ​selling yen put options.

Quizplus · Accepted Answer

Purchasing yen put options allows Salerno Inc. to lock in a minimum rate at which it can sell its yen receivables while still benefiting if the yen appreciates against the dollar.