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

question 44

Multiple Choice

A Japanese exporter has a €1,000,000 receivable due in one year.Spot and forward exchange rate data is given: $\begin{array}{rlr}Spot exchange rates&1 \text {-year Forward Rates } & \text { Contracts1ze } \\ \$ 1.20=€ 1.00&\$ 1.25=€ 1.0 C & € 62,500\\ \$ 1.00=€ 1.00&\$ 1.00=¥ 12 C & ¥ 12,500,000\end{array}$ 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

---

Definitions:

Alter or Falsify

The unethical and illegal action of changing or fabricating data, records, or documents.

Fractured Hip

A break in the upper portion of the femur (thigh bone) near the hip joint, often resulting from falls or direct impacts.

Social Media Policy

Guidelines for an organization's or institution's members to follow when using social media, intended to safeguard the organization's image and confidentiality.

American Nurses Association

A professional organization that represents the interests of registered nurses across the United States, aiming to improve healthcare standards and nursing practices.