Consider the following currency portfolio held by a US financial intermediary.

	Assets Denominated in Foreign currency	Liabilities Denominated in Foreign currency	Currency Bought Forward	Currency Sold Forward
Japanese yen	755m yen	525m yen	135m yen	440m yen
Euro	25m euro	100m euro	15m euro	325m euro
Pound sterling	10m pound	5m pound	50m pound	0

Notes: The current spot rates are: $1.13/euro; $1.61/pound sterling; $0.0084/yen. The current forward rates are: $1.15/euro; $1.57/pound sterling; $0.0089/yen. All $ are US dollars.

10. What is the portfolios exposure to the Japanese yen?
    1. -$75 million
    2. $+75 million
    3. 75 million yen
    4. +75 million yen
    5. +230 million yen
11. Using the difference between the spot and the forward rate as the measure of the exchange rate shock, what is the US dollar impact on the portfolio of the change in Japanese yen? (Measure the exchange rate change using the forward rate minus the spot rate.)
    1. - $37,500
    2. -$6.5 million
    3. -$2.2 million
    4. -$10.5 million
    5. -$22.2 million
12. Use currency forwards to construct a perfect (nave) hedge for the portfolios exposure to the Japanese yen.
    1. Buy 75 million yen forward.
    2. Sell 75 million yen forward.
    3. Buy 755 million yen forward.
    4. Sell 755 million yen forward
    5. Buy 525 million yen forward.
13. Comparing options hedges to futures/forward hedges:
    1. Options hedges mark to market more frequently than futures/ forward hedges.
    2. Options hedges have higher transactions costs than futures/forward hedges.
    3. Options hedges have asymmetric cash flows, whereas futures/forward hedges have symmetric cash flows.
    4. Only Choice B is correct.
    5. Choices A, B and C are correct.

Show the work please