Question

Salerno Inc. desires to lock in a minimum rate at which it could sell its net receivables in Japanese yen but wants to be able to capitalize if the yen appreciates substantially against the dollar by the time payment arrives, the most appropriate hedge would be:

Answer 1

Answer:

purchasing put options.

Explanation:

Based on the scenario being described within the question it can be said that the most appropriate hedge would be purchasing put options. Put options are a contract that gives the owner the ability to sell an underlying security for a pre-determined price at a specific time frame. Which allows the individual to take advantage of capitalization in the meantime. Such as in this case.