Question
XYZ Corporation, located in the United States, has an accounts payable obligation of 750 million payable in one year to a bank in Tokyo. The
XYZ Corporation, located in the United States, has an accounts payable obligation of 750 million payable in one year to a bank in Tokyo. The current spot rate is 116/$1.00 and the one year forward rate is 109/$1.00. The annual interest rate is 3 percent in Japan and 6 percent in the United States. XYZ 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 money market hedge is PLEASE SHOW WORK-STEP BY STEP
A. | $6,450,000. |
B. | $6,545,400. |
C. | $6,653,833. |
D. | $6,880,734. |
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