Business and finance help needed with the exchange rate

Nov 11th, 2015
Anonymous
Category:
Accounting
Price: $10 USD

Question description

You are a financial adviser to a U.S. corporation that expects to receive a payment of 40 million Japanese yen in 180 days for goods exported to Japan.  The current spot rate is 100 yen per U.S. dollar (E $ / yen  = 0.0100).  You are concerned that the U.S. dollar is going to appreciate against the yen over the next six months. 

 a. Assuming that the exchange rate remains unchanged, how much does your firm expect to receive in U.S. dollars? 
b.  How much would your firm receive (in U.S. dollars) if the dollar appreciated to 110 yen per U.S. dollar (E$ / yen  = 0.00909)?        
 c.  Describe how you could use an options contract to hedge against the risk of losses associated with the potential appreciation in the U.S. dollar.

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