JC bank in Japan has committed to deliver yen in 3 months to MT Ltd in the US, a corporate customer. The spot rate is 118 yen to the dollar and the 3-month forward rate is 106 yen per dollar. In recent years, there is increasing trading dealing with foreign currency in JC bank.

-Are there costs to hedging this exposure with the forward market? Explain. (10 marks)

- Explain FIVE (5) reasons about the level of foreign currency trading has increased in JC bank? (15m)