Question

If an importer expects that the Fed will intervene by exchanging dollars for Japanese yen, she...

If an importer expects that the Fed will intervene by exchanging dollars for Japanese yen, she would most likely ____ to lock in the price of yen.

purchase yen put options

sell yen futures contracts

purchase yen call options

buy U.S. Treasury bonds
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Answer #1

Answer:- purchase yen call options

Explanation:- If it is expected that the Fed will intervene by exchanging dollars for Japanese yen, it would likely appreciate the value of japanese yen, so purchase of yen call options will lock in the price of yen as call options gives the buyer or holder the right to buy the underlying security at a prespecified strike price on or before the expiration date. The value of call options of yen increases as there is appreciation in the value of japanese yen and price of yen will also get locked in.

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