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Jacks International is a major exporter of products to Japan. Despite the firm name the only international business Jacks has in in Japan (perhaps that
Jacks International is a major exporter of products to Japan. Despite the firm name the only international business Jacks has in in Japan (perhaps that will change one day). Jacks denominates its exports in dollars. Jacks is able to obtain debt financing in either yen or U.S. dollar and pays 3 percent and 9 percent respectively for the yen and dollar denominated financing. If it borrows yen, Jacks will be exposed to exchange rate risk. Is it possible for Jacks to borrow yen and reduce economic exposure to exchange rate risk?
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