Assumptions		Values
Spot rate (/$)		120.60
Spot rate, rupees/dollar (Rs/$)		47.75
Implied (calculated) spot rate (/Rs)		2.5257
180-day forward rate (/Rs)		2.4000
180-day Indian rupee investing rate		8.000%
180-day Japanese yen investing rate		1.500%
Currency agent's exchange rate fee		4.850%
P & G India's cost of capital		12.00%

5. Proctor and Gambles affiliate in India, P & G India, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in India, payment terms by Indian importers are typically 180 days or longer. P & G India wishes to hedge an 8.5 million Japanese yen payable. Although options are not available on the Indian rupee (Rs), forward rates are available against the yen. Additionally, a common practice in India is for companies like P & G India to work with a currency agent who will, in this case, lock in the current spot exchange rate in exchange for a 4.85% fee. If P&G India remains uncovered in its A/P exposure, how much will it owe if the exchange rate in 180 days is:

a) the same as the current spot rate?

b) the same as the current forward rate?

c) P&G India's expected exchange rate of 2.600 /Rs?