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1. On January 1, Madison Co. ordered raw material from Japan and agreed to pay 100 million yen for this order on April 1. It negotiated a 3-month forward contract to obtain 100 million Japanese yen on that date at $.009. On February 1, the Japanese firm informed Madison Co. that it wouldn't be able to fulfill the order. The Japanese yen spot rate on February 1 is $.0087, and the 2-month forward rate exhibits a 2 percent discount. To offset its existing contract, Madison Co. will negotiate a forward contract to for the date of April 1, and the profit/loss generated from this transaction is a U.S. dollars. (Use four decimal points) sell yen; gain of $60,000 b. sell yen; loss of $50,000 buy yen; gain of $60,000 d. buy yen; loss of $50,000 a. 2. The current spot exchange rate is $1.55 = 1.00. Consider a three-month American call option on 62,500 with a strike price of $1.50 = 1.00. If you pay an option premium of $5,000 to buy this call, at what exchange rate will you break-even? $1.48 = 1.00 b. $1.53 = 1.00 $1.58 = 1.00 d. $1.60 = 1.00 a. C