International Worldwide would like to execute a money market hedge to cover a 250,000,000 shipment from
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International Worldwide would like to execute a money market hedge to cover a ¥ 250,000,000 shipment from Japan of sound systems it will receive in six months. The current exchange rate is ¥124 = $1.
(a) How would International Worldwide structure the hedge? What would it do to hedge the Japanese yen it must pay in six months? The annual yen interest rate is 4.5%.
(b) The yen may rise to as much as ¥138=$1or fall to ¥111=$1. What will the total dollar cash flow be in six months in either case?
Expert Answer:
Answer rating: 100% (QA)
Soluti on a International should invest the present value of 250000000 or 25000000010225 2... View the full answer
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