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Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 800 million yen in one year. The current spot
Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 800 million yen in one year. The current spot rate is 114.1 yen per dollar and the one-year forward rate is 112.11 yen per dollar. The annual interest rate is 0.5% in Japan and 2.9% in the U.S. PCC can also buy a one-year call option on yen at the strike price of $.008900 per yen for a premium of .015 cents per yen. Compute the future dollar costs of meeting this obligation using the forward hedge. (USD, no cents
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