A Ford dealer in the United States may be exposed to a devaluation of the yen if this leads to a cut in the price of Japanese cars. Suppose that the dealer estimates that a 1 percent decline in the value of the yen would result in a permanent decline of 5 percent in the dealer’s profits. How should she hedge against this risk, and how should she calculate the size of the hedge position? You may find it helpful to refer back to Section 27.5.