If Lazer Co. desired to lock in the maximum it would have to pay for its net payables in euros but wanted to be able to capitalize if the euro depreciates substantially against the dollar by the time payment is to be made, the most appropriate hedge would be:
A) a money market hedge.
B) purchasing euro put options.
C) a forward purchase of euros.
D) purchasing euro call options.
E) selling euro call options.

Question

Quizplus · Accepted Answer

Purchasing euro call options allows Lazer Co. to lock in a maximum price for euros while still benefiting if the euro depreciates, as they can choose not to exercise the option and buy euros at the lower market rate.