Question
A Japanese EXPORTER has a 1,000,000 receivable due in one year. Spot and forward exchange rate data given in the table below: Spot FX Rates
A Japanese EXPORTER has a 1,000,000 receivable due in one year. Spot and forward exchange rate data given in the table below:
Spot FX Rates 1-Year Forward Rate Contract Size
$1.2000/Euro $1.2500/Euro 62,500Euros 100Yen/$ 120Yen/$ 12,500,000Yen The one-year risk free rates are i$ = 4.03%; i = 6.05%; and i = 1%.
Which of the following strategies would hedge FX risk using Forward Contracts?
A) sell 16 Forward contracts, and buy 12 Forward Japanese Yen contracts
B) sell 12 Forward contracts, and buy 16 Forward Japanese Yen contracts
C) buy 16 Forward contracts, and sell 12 Forward Japanese Yen contracts
D) buy 12 Forward contracts, and sell 16 Forward Japanese Yen contracts
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The New Retirementality Planning Your Life And Living Your Dreams At Any Age You Want
Authors: Mitch Anthony
4th Edition
1118705122, 978-1118705124
