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Your company expects to pay 5,000,000 Japanese yen 90 days from now. You decide to hedge your position by buying Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. You expect the spot rate in 90 days to be $.0099. How many dollars will you need to meet your obligation 90 days from now?

User Steppefox
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1 Answer

4 votes

Answer:

$47,500

Step-by-step explanation:

The computation of the dollars amount for meeting the obligation is shown below:

= Expected amount to pay × forward rate

= 5,000,000 × $0.0095

= $47,500

We simply multiply the Expected amount to pay with the forward rate so that the accurate amount can come.

All other information which is given is not relevant. Hence, ignored it

User Hamid Haghdoost
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