Question: IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed $270 million payable in six months. Currently, the spot USD/JPY rate is

IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed $270 million payable in six months. Currently, the spot USD/JPY rate is 106 and the six-month forward rate is 101. The six-month money market interest rate is 4.0 percent per annum in the U.S. and 1.4 percent per annum in Japan. The management of IBM decided to use the money market hedge to deal with this yen account payable. Calculate today's dollar cost of meeting this yen obligation. (USD, no cents)Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed 20 million which is payable in one year. The current EUR/USD rate is 1.0639 and the oneyear forward rate is 1.0716. The annual interest rate is 4.4% in the US. and 1.3% in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. It is considering to hedge borrowing euros from Credit Lyonnaise against the euro receivable. How much will they receive in one year? (USD, no cents) ll

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