A Japanese Exporter Has a €1,000,000 Receivable Due in One

question 96

Multiple Choice

A Japanese exporter has a €1,000,000 receivable due in one year.Detail a strategy using a money market hedge that will eliminate any exchange rate risk. $$\begin{array}{l}1 \text {-year rates of interest }\\\begin{array} { l r r } & \text { Borrowing } & \text { Lending } \\\text { Dollar } & 4.5 \% & 4.00 \% \\\text { Euro } & 6.009 & 5.25 \% \\\text { Yen } & 1.00 \% & 0.75 \%\end{array}\end{array}$$

$\begin{array}{lrl}\text { Spot exchange rates } & \text { 1-year Forward Rates } \\\$ 1.25=€ 1.0 C & \$ 1.2262=€ 1.00 \\\$ 1.00=¥ 10 C & \$ 1.03= ¥ 100\end{array}$

• A)Borrow €970,873.79 today.Convert the euro to dollars at the spot exchange rate,receive $1,165,048.54.Convert these dollars to yen at the spot rate,receive ¥.
• B)Borrow €943,396.22 today.Convert the euro to dollars at the spot exchange rate,convert these dollars to yen at the spot rate,receive ¥117,924,528.30.
• C)Lend €943,396.22 today.Convert the euro to dollars at the spot exchange rate,convert these dollars to yen at the spot rate.
• D)Convert ¥117,924,528.30 to dollars at the spot rate; convert dollars to euro at the spot rate; lend €943,396.22 at 5.25 percent.

---

Definitions:

Nutrients

Essential substances obtained from food that are vital for body function and growth.

Chronic Diseases

Long-lasting medical conditions that are usually progressive and may require ongoing medical attention or limit daily activities.

Fiber-Rich Diets

Diets high in dietary fiber, which help in digestion, can aid in weight management, and reduce the risk of several chronic diseases.

Nutrient Classes

Categories of nutrients that the body needs to maintain health, including carbohydrates, fats, proteins, vitamins, and minerals.