Nikken Microsystems (B) . Assume that Nikken Micorsystems prefers to receive US dollars rather than euros for the trade transaction described in problem 1. It is considering two alternatives:

(1) sell the acceptance for euros at once and convert the euros immediatly to US dollars at the spot rate of exchange of $1.00/Euro or

(2) hold the euro acceptance until maturity but at the start sell the expected euro proceeds forward for dollars at the 3 month forward rate of $1.02/Euros.

a. What are the US dollar net proceeds received at once from the dicounted trade acceptance in alternative 1?

b. What are the US dollar net proceeds received in three months in alternative 2?

c. What is the break even investment rate that would equalize the net US dollar proceeds from both alternatives?

d. Which alternative should Nikken Microsysystems choose?