Question
A car dealer in U.S. expects a delivery of new Honda Civics from Japan in 3 months. The price is fixed in Japanese yen. The
A car dealer in U.S. expects a delivery of new Honda Civics from Japan in 3 months. The price is fixed in Japanese yen. The dealer can eliminate the exchange risk if he hedges by
| Exchanging $ for yen at the spot rate and investing the proceeds in Japan | ||
| Selling forward yen for $ | ||
| Buying forward yen for $ | ||
| "He can do either (A) or (C), both would work" | ||
| There is no exchange risk for the dealer |
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
6th International Edition
0071229035, 978-0071229036
