Jenkins Electronics has purchased a large quantity of electronic components from a Japanese firm for use in its new DVD players. The Japanese supplier has agreed to give Jenkins payment terms of net 90.
The Japanese firm insists that payments be made in yen. The current exchange rate between the dollar and the yen is 108 yen per dollar.
The 3-month forward exchange rate is 105 yen per dollar. What strategy would you recommend to Jenkins if it wants to protect itself against increases in the value of the yen over the next 90 days?