Please answer the following:

A Japanese importer has a 1,000,000 payable due in one year.

Spot exchange rates								1-year Forward Rates								Contract size
	$	1.20	=		1.00				$	1.25	=		1.00				62,500
	$	1.00	=		100				$	1.00	=		120				12,500,000

The one-year risk free rates are i_$ = 4.03%; i = 6.05%; and i = 1%. Detail a strategy using forward contracts that will hedge his exchange rate risk. Have an estimate of how many contracts of what type.

a. Go short in 12 yen forward contracts. Go long in 16 euro contracts.

b. Go long in 12 yen forward contracts. Go short in 16 euro contracts.

c. Go short in 16 yen forward contracts. Go long in 12 euro contracts.

d. none of the options