You are importing TV sets worth ¥10 million from a Japanese manufacturer,and this amount is payable after 6 months.You can hedge your exchange risk by:

Question

Quizplus · Accepted Answer

By buying Japanese yen in the forward market, you can lock in a specific exchange rate and protect yourself from fluctuations in the currency's value over the next six months. This will allow you to know exactly how much you will be paying for the TV sets in your local currency, reducing the risk of unexpected losses due to exchange rate shifts. Selling Japanese yen in the forward market would not be a viable option, as you need to acquire the yen to pay the manufacturer. Borrowing Japanese yen may be an option, but it may not be necessary if you have enough cash on hand or access to financing in your local currency. Doing nothing would expose you to the risk of unfavorable currency movements, which could result in significant financial losses.

You Are Importing TV Sets Worth ¥10 Million from a Japanese