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QUESTION 1 A US bank manager believes the Japanese yen will appreciate relative to the dollar over the next three months and plans to use
QUESTION 1 A US bank manager believes the Japanese yen will appreciate relative to the dollar over the next three months and plans to use 4 Japanese yen forward contracts to trade based on this belief. Each contract has 10 million yen attached and carries a forward rate of $.005/yen. Find the manager's profit/loss from her forward contracts (in USD) if the spot rate is $.006yen when the contracts expire. Round intermediate steps to four decimals. O-40,000 O 40,000 O 10.000 0-10,000 O None of the above QUESTION 2 Use the following information to answer the next two questions. An American company will receive 80 million euros in 6 months. The current spot rate is $1.15/euro and the 6 month forward rate is $1.4/euro. The company should sell a forward contract on 80 million euros to hedge its exchange rate risk. True False QUESTION 3 Find the company's profit/loss (in dollars) from its forward contract if the spot rate is .625/$ at expiration. O 20,000,000 0 -20.000.000 O 16.000.000 - 16,000,000 O None of the above
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