A.

A Japanese importer has a $1,250,000 payable due in one year. Spot exchange rates are $1 per 100, 1-year forward rates are $1 per 120. The contract size is 12,500,000. Which strategy can hedge his exchange rate risk?

Group of answer choices

Go long in dollar forward contracts.

Go short in dollar forward contracts.

Go long in yen forward contracts.

none of the options

B.

A counterparty may use a currency swap

Group of answer choices

to obtain debt financing in the swapped currency at an interest cost reduction brought about through comparative advantages each counterparty has in its national capital market, and the benefit of hedging long-run exchange rate exposure.

to hedge and to speculate.

to play in the futures and forward markets.

to hedge and to speculate, as well as to play in the futures and forward markets.

C.

An importers financial market hedging alternatives dont include which of the following:

Group of answer choices

Use currency swaps to acquire financial liabilities in the foreign currency.

Buy the foreign currency with long-dated forward contracts.

Use a rolling hedge to repeatedly buy the foreign currency.

Enter into a call option on the foreign currency.

D.

Which of the following is NOT a reason for home bias in international portfolio management?

Group of answer choices

Diversification away from systematic risk

Market frictions

Unequal access to information

Hedging domestic liabilities