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You are the CFO of a Japanese firm located in Tokyo. Your firm is importing 800,000 USD in 1 month for equipment bought from a
You are the CFO of a Japanese firm located in Tokyo. Your firm is importing 800,000 USD in 1 month for equipment bought from a US firm. You are given the following exchange rates: Today's spot USD/JPY=108 Today's one-month forward USD/JPY=103 a. Is the Japanese Yen selling at a forward premium or discount? Why? b. Compute the annualized forward/discount for the JPY/USD c. If you choose to hedge this transaction with a forward contract, what will be the amount in JPY? d. Assume that one month later, the spot USD/JPY=102. Would it have been better to wait for the future spot? How much did you save/lose
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