8. Cost Plus Imports is a West Coast chain specializing in low cost imported goods, principally from Japan. It has to put out its semiannual catalogue with prices that are good for six months. Advise Cost Plus Imports on how it can protect itself against currency risk.
ANSWER. A company such as Cost Plus will typically negotiate purchase contracts with the suppliers of its catalogue merchandise in advance. Cost Plus could hedge these purchases using forward contracts. A problem, though, is that if the foreign currencies ...
This posting provides a detailed solution to the student's question.