A Japanese EXPORTER has a 1,000,000 receivable due inone year. Spot and forward exchange rate data given as follows:

Spot ($/) = 1.2000, 1-Year Forward Rate=($/) = 1.2500, Contract Size=62,500

Spot (/$) = 100.00, 1-Year Forward Rate=($/) = 120.00, Contract Size=12,500,000

The one-year risk free rates arei_$= 4.03%;i= 6.05%; andi= 1%. Detail a strategy using forward contractsthat will hedge exchange rate risk.

a.	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.
b.	Sell 1m forward using 16 contracts at the forward rate of $1.20 per 1. Buy 150,000,000 forward using 11.52 contracts, at the forward rate of $1.00 = 120.
c.	Sell 1m forward using 16 contracts at the forward rate of $1.25 per 1. Buy 150,000,000 forward using 12 contracts, at the forward rate of $1.00 = 120.
d.	None of the above.