Question: Firm AAA, located in the U.S., has a payable obligation of 500 million payable in one year to a bank in Japan. The current spot

  1. Firm AAA, located in the U.S., has a payable obligation of 500 million payable in one year to a bank in Japan. The current spot rate = 110/$. Japans annual interest rate = 1%. The annual interest rate in the U.S. = 3%. Calculate the dollar cost for this obligation using the money market hedge.

    $4,635,464

    $3,545,900

    $3,480,100

    $4,810,714

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