1. Kona Macadamia Nuts. Kona Macadamia Nuts, based in Hilo, Hawaii, exports Macadamia nuts worldwide. The Japanese market is its biggest export market, with average annual sales invoiced in yen to Japanese customers of 1,200,000,000. At the present exchange rate of 125/$ this is equivalent to $9,600,000. Sales are relatively equally distributed during the year. They show up as a 250,000,000 account receivable on Kona Macadamia Nuts' bal- ance sheet. Credit terms to each customer allow for 60 days before payment is due. Monthly cash collec tions are typically 100,000,000. Kona would like to hedge its yen receipts, but it has too many customers and transactions to make it practical to sell each receivable forward. It does not want to use options because they are considered to be too expensive for this particular purpose. Therefore, they have decided to use a "matching" hedge by borrowing yen.

a. How much should Kona borrow in yen?

b. What should be the terms of payment on the yen loan?