Your firm has just tendered for a contract in Japan. You won't know for 3 months whether you get the contract but if you do, you will receive a payment of 10 million yen a year from now. You are worried that if the yen declines in value, the dollar value of this payment will be less than you expect and the project could even show a loss. Discuss the possible ways that you could protect the firm against a decline in the value of the yen. Illustrate the possible outcomes if you do get the contract and if you don't.

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The Answer of Your firm has just tendered for a contract in Japan. You won't know for 3 months whether you get the contract but if you do, you will receive a payment of 10 million yen a year from now. You are worried that if the yen declines in value, the dollar value of this payment will be less than you expect and the project could even show a loss. Discuss the possible ways that you could protect the firm against a decline in the value of the yen. Illustrate the possible outcomes if you do get the contract and if you don't.

Your Firm Has Just Tendered for a Contract in Japan