Suppose PepsiCo Hedges a ¥1 Billion Dividend It Expects to Receive

question 3

Multiple Choice

Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract.The current spot rate is ¥150/$1 and the 90-day forward rate is ¥149/$1.If the spot rate in 90 days is ¥154/$,how much has this forward market hedge cost PepsiCo?

• A)$173,160
• B)$44,743
• C)Pepsi gains $173,160 from the forward contract
• D)Pepsi gains $217,903 from the forward contract

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