Assume a firm will receive JPY25,000,000 in six months and decides to hedge using futures on...
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Assume a firm will receive JPY25,000,000 in six months and decides to hedge using futures on JPY at a 6-month futures rate of $0.008734. (a) To hedge the exchange rate risk, will the firm purchase or sell the Japanese yen futures contract? Is the firm's position in the Japanese yen futures contracts a long or a short position? (b) Suppose that six months later the spot exchange rate for JPY is $0.008629. Calculate the real cost of the hedging in U.S. dollars. Is the hedging favorable or unfavorable? Why? Be sure to show the details of your calculations, Assume a firm will receive JPY25,000,000 in six months and decides to hedge using futures on JPY at a 6-month futures rate of $0.008734. (a) To hedge the exchange rate risk, will the firm purchase or sell the Japanese yen futures contract? Is the firm's position in the Japanese yen futures contracts a long or a short position? (b) Suppose that six months later the spot exchange rate for JPY is $0.008629. Calculate the real cost of the hedging in U.S. dollars. Is the hedging favorable or unfavorable? Why? Be sure to show the details of your calculations,
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a The firm will sell the Japanese yen futures contract to hedge t... View the full answer
Related Book For
Financial Institutions Management A Risk Management Approach
ISBN: 978-0071051590
8th edition
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
Posted Date:
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