Question

In Chicago, the size of a yen futures contract is 12.5million yenThe initial margin is $2,025, and the maintenance margin is $1,500.you decide to buy 10 contracts, with maturity in June, at the currentmarket futures price of $0.01056 per ￥ . Today is April 1, and thespot rate is $0.01041 per ￥. Indicate the cash flow on yourposition if the following prices are subsequently observed.(Assume the spot and futures prices stay equal to the previousquotes on the dates that are not indicated in the table.

Answer 1

The exchange rate between the U.S. dollar and the Japanese yen has experienced notable fluctuations, which impact businesses and economies, especially those heavily involved in international trade.

Step-by-step explanation:

The U.S. dollar exchange rate fluctuates against the Japanese yen as indicated by historical data. For instance, on January 1, 2002, the exchange was 133 yen per dollar, which changed to 103 yen per dollar by January 1, 2005. Subsequent years saw further variations, such as 122 yen per dollar on June 1, 2007, 77 yen per dollar on January 1, 2012, and returning to 120 yen per dollar by March 1, 2015. The continued movements, especially between 2016 and 2020, when the yen appreciated from 118 to 103 yen per dollar, reflect changes in investor sentiment and economic pressures.

These shifts in exchange rates can have significant impacts on businesses, particularly those involved in international trade. Large swings in the rate can cause stress on economies and even lead to corporate bankruptcies or banking collapses. Thus, understanding and monitoring currency exchange rates is crucial for companies engaging in cross-border transactions.