You are a financial adviser to a Japanese corporation that expects to receive a payment of 500,000 USD in 90 days for goods exported to the U.S. The current spot rate is 140 Japanese yen (JPY) per U.S. dollar (E$/ = 0.00714). You are concerned that USD is going to depreciate against JPY over the next three months.

a) Assuming that the exchange rate remains unchanged, how much does your firm expect to receive in Japanese yen?

b) How much would your firm receive (in Japanese yen) if the U.S. dollar depreciates to 120 yen per U.S. dollar (E$/ = 0.00833)?

c) Describe how you could hedge against the risk of losses associated with the potential depreciation of the U.S. dollar.