Business, 14.05.2021 17:40 kashbaby

A Japanese exporter has a €1,000,000 receivable due in one year. Spot and forward exchange rate data is given: Spot exchange rates 1-year Forward Rates Contract size $ 1.20 = € 1.00 $ 1.25 = € 1.00 € 62,500 $ 1.00 = ¥ 100 $ 1.00 = ¥ 120 ¥ 12,500,000 The one-year risk free rates are i$ = 4.03%; i€ = 6.05%; and i¥ = 1%. Detail a strategy using forward contracts A. Borrow €970,873.79 today; in one year you owe €1m, which will be financed with the receivable. Convert €970,873.79 to dollars at spot, receive $1,165,048.54. Convert dollars to yen at spot, receive ¥116,504,854. B. Sell €1m forward using 16 contracts at the forward rate of $1.20 per €1. Buy ¥150,000,000 forward using 11.52 contracts, at the forward rate of $1.00 = ¥120. C. Sell €1m forward using 16 contracts at the forward rate of $1.25 per €1. Buy ¥150,000,000 forward using 12 contracts, at the forward rate of $1.00 = ¥120. D. none of the options

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A Japanese exporter has a €1,000,000 receivable due in one year. Spot and forward exchange rate data...