Suppose that you are the treasurer of IBM with an extra $$1,000,000$ to invest for six months. You are considering the purchase of U$.$S$.$ T$-$bills that yield $1\mathrm{.}810$ percent over a six$-$month period. The spot exchange rate is $$1\mathrm{.}00=100,$ and the six$-$month forward rate is $$1\mathrm{.}00=110.$ Alternatively, the six$-$month interest rate in Japan on an investment of comparable risk is $13$ percent. What is your strategy to maximize guaranteed dollar proceeds in six months?

Multiple Choice

Take $$1$mn$,$ convert them into yen at the spot rate, invest in Japan, and hedge with a short position on the forward contract.

Take $$1$mn$,$ convert them into yen at the forward rate, invest in Japan, and hedge with a short position on the spot contract.

Take $$1$mn and invest in U$.$S$.$ T$-$bills.

Take $$1$mn$,$ convert them into yen at the spot rate, invest in Japan, and repatriate your yen earnings back into dollars at the spot rate prevailing in six months.