US company XYZ$,$ which generates revenue from all over the world, has one of the biggest

sources of income in Tokyo. XYZ expects to receive $500$ million from its Tokyo operations in

three months and another $500$ million in six months. It would like to lock in the exchange rate

on these two cash flows and thereby eliminate any risk of an unfavourable move in exchange

rates. The investment banker indicates that the three$-$months forward $$/$ rate is $0\mathrm{.}009123$ and

forward $$/$ rate is $0\mathrm{.}009178.$ What steps will the company XYZ use to hedge its exchange rate

risk? Show how the company locks its future revenue. What are limitations of forward

contracts?