2. Jimmy's Apple Company imports apples to Virginia from Japan.A vendor in Japan has agreed to a price of 10,000,000 Japanese yen, due in 90 days. The following statistics describe the current state of the Japanese Yen-Dollar FX market.

1. The spot rate is USD 0.0682/JPY
2. The 90-day interest rate in Japan is 2.54%
3. The 90-day interest rate in the US is 1.68%

The option market has the following contracts available:

A call option on 10,000,000 JPY with a strike price equal to USD $690,000 (I.e., per Japanese Yen is $0.0690) will cost $31,000.

A put option on 10,000,000 JPY with a strike price equal to USD $690,000 (I.e., per Japanese Yen is $0.0690) will cost $15,000.

What is your estimate for the cash flow in terms of USD, which will result from the firm's following choices: to not hedge at all, use a forward market hedge, or use one of the options (listed above) to hedge. For the options choice, you need to decide whether a call or a put is most appropriate. Note that your answers should be negative as the cash flow is to pay a vender.

Spot Market at S(1) No Hedge Options Forward Markets

USD 0.0600/JPY

USD 0.0625/JPY

USD 0.0650/JPY

USD 0.0675/JPY

USD 0.0700/JPY

USD 0.0725/JPY

USD 0.0750/JPY