If Salerno Inc

question 88

Multiple Choice

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

• A) a money market hedge.
• B) a forward sale of yen.
• C) purchasing yen call options.
• D) purchasing yen put options.
• E) selling yen put options.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a set of accounting rules and standards used in the United States for preparing financial statements.

IFRS

A collection of worldwide accounting rules for financial reporting, known as International Financial Reporting Standards.

Credit Card Sale

A transaction in which the purchase of goods or services is made using a credit card, allowing customers to delay payment and sellers to receive immediate funds.

Grace Period

A set period of time after the due date during which payment can be made without penalty.