Spot Foreign Exchange 99.50 100.50 Y/$

1 year USD interest rate spread (for top credits) 2.1 % - 1.9%

1 year YEN interest rate spread (for top credits) 1.1 % - 0.9 %

Your firm is not a bank and must pay spreads in the money markets. You have a trade receivable (invoice) from your client/customer (a AAA credit) which is due in a year in Yen for 1MY. Your home currency is USD and your firm is also a top (AAA) credit.

Instead of paying 1MYen in a year, your client/customer wants to amend this invoice and opens negotiations offering to change the timing and/or the currency of it along with its face value. They propose three possible variations, considered each separately on its own merits.

a) To accept the first proposed change, in a negotiation what would be your breakeven or minimum sum to receive immediate Yen instead of Yen in a year (2 decimal places)?

b) To accept a different proposed change, in a separate negotiation what would be your breakeven or minimum sum to receive immediate Dollars instead of Yen in a year (2 decimal places)?

c) To accept a third alternate change, in this negotiation what is your breakeven or minimum sum for receiving Dollars in a year instead of Yen in a year (2 decimal places)?

d) Assuming that the clients business activity also does not include making markets in money (i.e. they face spread costs) in this last negotiation (for dollars in a year) what is the maximum amount of dollars in a year that the client would be prepared to pay (2 decimal places)?