Question
Hakuna matata Inc. currently does not have excess cash on hand and will pay 22,000,000 Japanese yen (JPY) in a year. The spot rate for
Hakuna matata Inc. currently does not have excess cash on hand and will pay 22,000,000 Japanese yen (JPY) in a year. The spot rate for the Japanese yen is USD 0.0112 and the 1-year forward rate for the yen is USD 0.0125. The investing and borrowing rate in Japan are is 4% p.a. and 8% p.a., respectively. The investing and borrowing rate in the U.S. are 2% p.a. and 5% p.a., respectively. If the company hedges its transaction exposure by engaging in the money market hedge, how much USD will the company pay to the bank in a year?
Select one:
a. 248,769
b. 232,711
c. 244,053
d. 260,894
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