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 1000Yen. Your home currency is USD and your firm is also a top (AAA) credit.

Instead of paying 1000Yen 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.

REQUIRED

1.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 (rounded to 2 decimal places)?

2.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 (answer to 2 decimal places)?

3.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 (to 2 decimal places)?

4.Assuming that the clients business activity also does not include making markets in money (i.e. they face spread costs), in this last negotiation (to 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)?