Industry for 620 million yen payable in one year. The current spot rate is 130/$ and...
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Industry for 620 million yen payable in one year. The current spot rate is ¥130/$ and the one-year forward rate is ¥116/$. The annual interest rate is 5 percent in Japan and 8 percent in the United States. PCC can also buy a one- year call option on yen at the strike price of $.0075 per yen for a premium of 014 cents per yen. a. Compute the future dollar costs of meeting this obligation using the money market and forward hedges. Answer is complete and correct. Money Market 4,905,495 Forward Hedge $ 5,344,828 b. Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used. Answer is complete but not entirely correct. Expected future dollar cost 2$ 4,715,100 X %24 %24 Industry for 620 million yen payable in one year. The current spot rate is ¥130/$ and the one-year forward rate is ¥116/$. The annual interest rate is 5 percent in Japan and 8 percent in the United States. PCC can also buy a one- year call option on yen at the strike price of $.0075 per yen for a premium of 014 cents per yen. a. Compute the future dollar costs of meeting this obligation using the money market and forward hedges. Answer is complete and correct. Money Market 4,905,495 Forward Hedge $ 5,344,828 b. Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used. Answer is complete but not entirely correct. Expected future dollar cost 2$ 4,715,100 X %24 %24
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Option premium Premium rate Accounts payable obligatiion Debt 3 0014 100 620000000 86800 Future ... View the full answer
Related Book For
Fundamentals of Physics
ISBN: 978-1118230725
10th Extended edition
Authors: Jearl Walker, Halliday Resnick
Posted Date:
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