3. Trading in foreign exchange What are spot rates and forward rates? Lost Pigeon Aviation, a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for Y625 million, but the Japanese firm has 60 days before it must make the payment to Lost Pigeon Aviation The spot exchange rate is 129.20 per dollar, and the 60-day forward rate is 134.56 per dollar. Is the yen selling at a premium or at a discount in the forward market relative to the U.S. dollar? The yen is trading at a discount in the forward market In the forward market, the yen is trading at a premium. If the customer pays Lost Pigeon Aviation the Y625 million today, how much will Lost Pigeon Aviation receive in dollars? $4.84 million $5.57 million $4.36 million $5.32 million Assuming that the forward market is correct and the spot exchange rate in 60 days will equal the 60-day forward exchange rate today, Lost Pigeon Aviation would get more dollars if the Japanese firm paid off its account milion In 60 days today Assuming that the forward market is correct and the spot exchange rate Aviation would get more dollars if the Japanese firm paid off its account ill equal the 60-day forward exchange rate today, Lost Pigeon