Homework Help: International Finance

Posted by Harry on Tuesday, February 7, 2012 at 8:39pm.

Suppose that the current Bid-Offer on the Yen is $0.0089/Ą and $0.0091/Ą, and the three-month forward is $0.0094/Ą.

1. If you wish to hedge 10,000,000 Yen Obligation due in three months, what position would you take? Explain why.
a. Buy Yen forward at $0.0089/Ą
b. Sell Dollars forward at $0.0091/Ą
c. Sell Yen forward at $0.0094/Ą
d. Buy Dollars forward at $0.0094/Ą
e. Buy Yen forward at $0.0094/Ą

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