Question 1 (30 mark) Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Indu stry for 500 million yen payable in one year. The current spot rate is 124/$ a nd the one year forward rate is 110/$. The annual interest rate is 5 percent i In Japan and 8 percent in the USA. PCC can also buy a one-year call option on yen at the strike price of $0.0081 per yen for a premium of 0.014 cents per yen. Required: (a)Compute the future dollar costs of meeting this obligation using the money market and forward hedges. (10 Marks) (b)Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation w hen the option hedge is used. (10 Marks) (c) At what future spot rate do you think PCC may be indifferent between the o ption and forward hedge? (10 Marks)