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GED Corporation, located in the United States, has an accounts payable obligation of 800 million...

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Finance

GED Corporation, located in the United States, has an accounts payable obligation of 800 million payable in one year to a bank in Tokyo. The current spot rate is 115/$1.00. The annual interest rate is 3 percent in Japan and 6 percent in the united states. GED can also buy a one-year call option on yen at the strike price of $0.0080 per yen for a premium of 0.010 cent per yen.
At what one-year spot rate would GED be indifferent between money market hedging and option market hedging ?
116/$1.00
This rate does not exist
109/$1.00
116.28/$1.00

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