Senario

• We are a car dealership in NOLA.
• We will import Japanese Cars (Suzuki) for JPY 200,000,000
• We will pay in 3 months
• We will sell these cars in the US for USD
• We will collect USD within the 3 months

Risk defined

• We are collecting USD now (within the 3 months)
• We will buy JPY in 3 months (to pay for our debt of JPY 200,000,000)
• What if the JPY value against the USD goes up?

Please hedge this foreign exchange risk using derivatives similar to our class discussion on March 9th.