Suppose that you are the treasurer of IBM with an extra US$1,000,000 to invest for six months. You are considering the purchase of 6-month U.S. T-bills that yield 1.810% (that's a six month rate). The spot exchange rate is $1.00 = 100, and the six month forward rate is $1.00 = 110. The 6-month interest rate in Japan is 13 percent. What is your strategy?

• A. Take $1m, invest in U.S. T-bills.
• B. Take $1m, translate into yen at the spot, invest in Japan, hedge with a short position in the forward contract.
• C. Take $1m, translate into yen at the spot, invest in Japan, and repatriate your yen earnings back into dollars at the spot rate prevailing in six months.
• D. Take $1m, translate into yen at the forward rate, invest in Japan, hedge with a short position in the spot contract.