A Japanese pension plan has invested a portion of the entrusted money into a well diversified U.S. mutual fund that focuses on large capitalization stocks. The managers' of the pension plan want to protect their investment into the fund. They are concerned about two risks that could diminish the value of the plan's investment: 1) falling stock prices in the U.S. and 2) depreciation of the USD against the Japanese Yen.

Based on the following information and the example given in class, set up the hedge on February 3. What is the net value in JPY of the pension plan's investment on May 27? Note that the CME specifies for the S&P 500 futures 0.1 index points = USD 25,- and for the foreign exchange contract 12,500,000 Japanese yen per contract. Was the hedge effective?

	Mutual Fund (JPY)	Spot (=cash) USD/JPY	June S&P 500 futures (points)	June USD/JPY futures
Feb 3 May 27	98,758,624 82,465,462	0.010802 0.011211	868.60 739.62	0.010887 0.011256

Date	Cash Market	Futures Market
	Portfolio value JPY .
	Portfolio value JPY .