If Salerno Inc. desired to lock in a minimum rate at which it could sell its net receivables in Japanese yen but wanted 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

Quizplus · Accepted Answer

Purchasing yen put options allows Salerno Inc. to lock in a minimum rate to sell yen while retaining the ability to benefit if the yen appreciates, as they can choose not to exercise the option if the spot rate is more favorable.