Question
Princess Cruise Company (PCC), a U.S. based company, purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one
Princess Cruise Company (PCC), a U.S. based company, purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one year. The current spot rate is 124 yen per dollar and the one-year forward rate is 110 yen per dollar. The annual interest rate is 5% in Japan and 8% in the U.S. PCC can also buy a one-year call option on yen at the strike price of $.0081 per yen. What is the payoff of PCCs option in one year? (I didn't round my calculation until the end. Choose the closest number if you round in any intermediate steps). A. 17741.94
B. 2716049.38
C. 0
D. 495454.55
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