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Suppose a U.S. firm has just bought an asset from a Japanese firm for 500 million due in one year. Calculate today's cost (present value)
Suppose a U.S. firm has just bought an asset from a Japanese firm for 500 million due in one year. Calculate today's cost (present value) of meeting this obligation using a money market hedge. The spot exchange rate for Japanese yen is 122/$ and the one year forward exchange rate for Japanese yen is 130/$. The one-year interest rate is 5% in the U.S. The one-year interest rate in Japan is 12.00%: Select one: a. $3,485,000 b. $3,659,250 c. $446,428,571 d. $3,663,004
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