Question: A company based in the US has bought components from Japan for 200 million, payable in four months' time.The following data is available: BidAsk USD/JPY

A company based in the US has bought components from Japan for 200 million, payable in four months' time.The following data is available:

BidAsk

USD/JPY spot rate:94.000094.0040

USD/JPY 4 month forward rate:86.100089.7000

Euroyen borrowing interest rate:0.4% per annum

Euroyen investment interest rate:0.1% per annum

Strike price for a USD/JPY call option:92.0000

Premium for this call option:2.0%

The company's cost of capital12% per annum

Required

Evaluate the company's hedging options.

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