You are importing TV sets worth ¥10,000,000 from a Japanese manufacturer, and this amount is payable after six months.You can hedge your exchange risk by doing one of the following.
A)Buying Japanese Yen in the forward market.
B)Selling Japanese Yen in the forward market.
C)Borrowing Japanese Yen.
D)Do nothing.

Question

Quizplus · Accepted Answer

Buying Japanese Yen in the forward market will allow the company to lock in a specific exchange rate for the future payment, reducing the risk of exchange rate fluctuations. This way, the company is protected if the yen depreciates against the company's currency, as they have locked in a favorable exchange rate.

You Are Importing TV Sets Worth ¥10,000,000 from a Japanese