XYZ Corporation, located in the United States, has an accounts payable obligation of 750 million payable in

Question:

XYZ Corporation, located in the United States, has an 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 of $0.0086 per yen for a premium of 0.012 cent per yen. The maximum future dollar cost of meeting this obligation using the call option is
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...