1.A) Which of the following is the most likely strategy for a U.S. firm that will be paying off loans dominated in Japanese Yen in the future and desires to avoid exchange rate risk (assume the firm has no offsetting position in francs)?

purchase a call option on Japanese Yen.

sell a futures contract on Japanese Yen.

obtain a forward contract to sell Japanese Yen forward.

all of the above are appropriate strategies for the scenario described.

1.B ) If your firm expects the euro to substantially depreciate due to European debt crisis, it could speculate by _______ euro put options or _______ euros forward in the forward exchange market.

Selling, Selling

Selling, Purchase

Purchasing, Purchasing

Purchasing, Selling