13 1 point IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed 250 million payable in three months. Currently, the spot exchange rate is 105/$ and the three-month forward rate is 100/$. The three-month money market interest rate is 8 percent per annum (or 2% for 3 months) in the U.S. and 6 percent per annum (or 1.5% for 3 months) in Japan. The management of IBM is considering using the forward contract or the money market hedge to deal with this yen account payable. Calculate the future dollar cost of meeting this Yen obligation if you decide to hedge using the forward contract. $2,380,000 $2,380,952 $2,500,000 $2,580,952 1 point (Previous Problem Continued) If you decide to hedge using the money market, what should you do today? Since I will be paying yen in 3 months, I should deposit(invest) yen today and have it compound to the number I need to pay in 3 months. Since I will be receiving yen in 3 months, I should borrow yen today and have it compound to the number I will receive in 3 months so that I can return the money I borrowed plus interest. 14 15 1 point 16 17 (Previous Problem Continued) Following the previous problem, how much should you deposit or borrow? JPY246,305,418 JPY245,098,039 JPY244,332,040 JPY243,928,383 1 point (Previous Problem Continued) What is the dollar cost today? $2,045,766 $2,145,766 $2,245,766 $2,345,766 1 point (Previous Problem Continued) What is the dollar cost in 3 months? Calculated as today's cost times one plus dollar interest rate (2%) $2,192,681 $2,292,681 $2,392,681 $2,492,681