A Japanese EXPORTER has a 1,000,000 receivable due in one year. Spot and forward exchange rate data is given in the table:

Spot Rate	1-year forward rate	Contract Size
$1.20 =1.00	$1.25= 1.00	62.500
$1.00 =100	$1.20= 120	12,500,000

The one-year risk free rates are i_$ = 4.03%; i = 6.05%; and i = 1%. Detail a strategy using forward contract that will hedge exchange rate risk.

Group of answer choices

Sell 1m forward using 16 contracts at the forward rate of $1.25 per 1.

Borrow 970,873.79 today; in one year you owe 1m, which will be financed with the receivable. Convert 970,873.79 to dollars at spot, receive $1,165,048.54. Convert dollars to yen at spot, receive 116,504,854.

Buy 1m forward using 16 contracts at the forward rate of $1.20 per 1.