Assume that you are an importer of grain into Japan from the United States. You have agreed to make a payment in dollars, and you are scheduled to pay $377,287 in 90 days after you receive your grain. You face the following exchange rates and interest rates:

Spot exchange rate: 106.35/$

90-day forward exchange rate: 106.02/$

90-day dollar interest rate: 3.25% p.a.

90-day yen interest rate: 1.9375% p.a.

a. Describe the nature and extent of your transaction foreign exchange risk.

b. Explain two ways to hedge the risk.

c. Which of the alternatives in part b is superior