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.

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Elderly

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Height Differences

The variations in stature among individuals or groups, often influenced by genetics, nutrition, and environmental factors.

Upper Classes

The social group consisting of people with the highest social status, often associated with wealth, hereditary titles, or positions.

Lower Classes

Social groups that occupy the bottom tier of a society based on wealth, education, and job status, often with less access to resources.