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Business, 12.03.2020 20:31 tinsey

Suppose a US firm just bought an asset from a Japanese firm for ¥500 million, due in one year. The spot exchange rate for Japanese yen is ¥122/$ and the one year forward exchange rate for Japanese yen is ¥130/$. The one-year interest rate is 5% in the U. S. and 12% in Japan. Calculate the dollar cost at the time of payment of meeting this obligation using a money market hedge.

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