A U.S. company has bought JP12,500,000 worth of equipment from a Japanese maker and the amount will be due in December. The financial manager decided to use the yen futures contract (size of 12,500,000) to hedge the currency risk. (Hedging, Marked-to-market)

a. Should the company purchase or sell a December yen futures contract? Why?

b. Suppose the company purchased or sold the December yen futures contract today from (a), which settles at $.010624/. The next day the same contract settles at $.010690/. Should the companys margin account be credited or debited? Why? By how much should the account be credited or debited?