ABC purchased computer chips from DEF, a Japanese electronics concern, and was billed 250 million payable in three months. Currently, the spot exchange rate is 10 /US $ and the three-month forward rate is 100/ US $. The three-month money market interest rate is 8 percent per annum in the United States (U.S.) and 7 percent in Japan. The management of ABC decided to use a money market hedge to deal with his yen account payable. Compute the dollar cost of meeting this yen obligation. (8 marks) Suppose the annual inflation rate in the U.S. is expected to be 6%, while it is expected to be 2.5% in Australia. The annual interest rate in the U.S. is expected to be 9%, while it is expected to be 3% in Australia. The current spot rate for the Australian Dollar (AD) is \$0.85. According to relative PPP, estimate the expected percentage change in the value of the AD during a oneyear period. (6 marks) Explain TWO (2) differences between the domestic and multinational optimal apital structure. (6 marks) (Total: 20 marks) Continued