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A U.S firm has a debt obligation of 187 million payable in one year. The current spot rate is 114 per U.S dollar and the
A U.S firm has a debt obligation of 187 million payable in one year. The current spot rate is 114 per U.S dollar and the one-year forward rate is 108 per U.S dollar. Additionally, a one-year Call option on the Yen with a strike price of $0.0084 per yen can be purchased for a premium of 0.01 cent per yen. This risk-free money-market rate in Japan is 1.9% and the risk-free money-market rate in the U.S is 3.3%. Calculate the future U.S dollar cost of meeting this obligation using a money market hedge
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