Question
X Y Z Corporation, located in the United States, has an accounts payable obligation of Y 500 million payable in one year to a bank
X Y Z Corporation, located in the United States, has an accounts payable obligation of Y 500 million payable in one year to a bank in Tokyo. The current spot rate is Yen 116/$l.00 and the one year forward rate is yen109/$1.00. the annual interest rate is 3% in Japan and 6% in the United States. X Y Z can also buy a one-year call option on yen at the strike price of $0.0086 per yen for a premium of 0.012 cent per yen. The future dollar cost of meeting this obligation using the forward hedge is
a. $4,435,889.
b. $4,363,600,
c. $4,587,156.
d. $4,300,000.
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