Question

As the financial officer for an international​ firm, you need to keep a certain balance on foreign currency. You see that the yen is expected to rise again in the future as more plants resume​ production, so you keep a larger supply of the yen on hand than you normally would in anticipation of this. What strategy are you​ using?

a) Forward Contracting
b) Hedging
c) Speculation
d) Arbitrage

Answer 1

The strategy being used by the financial officer who is managing foreign currency for an international firm, by holding a larger supply of yen in anticipation of its rise, is known as speculation.

Step-by-step explanation:

As the financial officer for an international​ firm, the strategy you are using by keeping a larger supply of yen on hand in anticipation of its rise due to increased production is known as speculation. This approach involves anticipating future movements in exchange rates and holding a currency with the expectation that it will increase in value. Unlike hedging, which is focused on protecting against risks associated with currency fluctuations, speculation is more about taking on risk with the potential for financial gain.