You are a financial adviser t

timer Asked: Nov 11th, 2015

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.

Tutor Answer

(Top Tutor) Studypool Tutor
School: Purdue University
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors