1. SweetSeed Inc. has accounts payable of 29,000,000 Japanese yen (JPY), which are due within...
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1. SweetSeed Inc. has accounts payable of 29,000,000 Japanese yen (JPY), which are due within one year. The spot rate for the yen is 0.0127 U.S. dollars, the forward rate for the yen is 0.0144 US dollars. The annual savings and borrowing rates in Japan are 7% and 12%, respectively. The annual savings and borrowing rates in the U.S. are 9% and 12%, respectively. If the company wants to lock in the exchange rates using the money market hedge, the payment (in U.S. dollars) to the bank in a year would be:
a.385,510
b.351,858
c.358,435
d.378,437
2. SweetSeed Inc. has accounts receivable of 20,000,000 Japanese yen (JPY), which are due within one year. The spot rate for the yen 0.0124 is U.S. dollars, and the forward rate for the yen is 0.014 US dollars. The annual savings and borrowing rates in Japan are 8% and 12%, respectively. The annual savings and borrowing rates in the U.S are 7% and 10%, respectively. If the company wants to lock in the exchange rates using the money market hedge, the U.S. dollar-denominated deposit in a year would be:
a.259,589
b.236,929
c.252,593
d.243,491
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