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Best predictor of the future spot rate

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XYZ Corporation, located in the United States, has an accounts payable obligation of ¥639 million payable in one year to a bank in Tokyo. The current spot rate USDJPY = 105.98 and the one year forward rate is 104.34. The annual interest rate is 1.5 percent in Japan and 3.4 percent in the United States. XYZ can also buy a one-year call option on yen at the strike price of $0.0095 per yen for a premium of 0.032 cent per yen. Assume that the forward rate is the best predictor of the future spot rate. The future dollar cost of meeting this obligation using the option hedge is.

Reference no: EM133474989

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