Suppose that OSG undertakes the same mandatory hedging policy as S. Corporation, the American company whose minimum forward-cover schedule is shown in Exhibit 9. Apply this schedule to the US$1 million account receivable case for OSG and find the expected total end-of-period value of the position taken by OSG. OSG expected to receive a US dollar (foreign currency) payment of US$1 million in three months. The spot rate was 115.03/$, and the forward rate 116.18/$ as shown in Appendix 1. Use Exhibit 10 for minimum forward-cover. Note that the yen is the home currency for OSG.

a. What would be the amount of forward cover required?

b. If the spot rate in three months was expected to be 110.00/$, what would be the amount in US dollars, covered and uncovered?

C. What would be the expected total end-of-period yen value of the position taken in part (b)? Suppose the spot rate in three months will be 115.00/$.