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What is japan profit

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Q1. Suppose Japan imports pharmaceutical products from the US and have $61 million payment due in 9 months. The current annual borrowing and lending rate of $ is 5% and 4% respectively while the annual borrowing and lending rate of ¥ is 12% and 10% respectively. The spot rate is ¥6.36/$ now and ¥6.65/$ in 9 months with no spread.
Japan uses a money market hedge to protect the value of this payment.

What is Japan's profit/loss (in ¥) on the money market hedge in 9 months.

a. -3667349.398 ¥

b. 31223488.372 ¥

c. 45401428.571 ¥

d. 39045596.330 ¥

e. None of the options

f. 22329357.798 ¥

Q2. Suppose UNSW is contracting with 3M to purchase 31000 face masks for its staff and students from the United States. UNSW and 3M decide to share currency risk. As part of the risk sharing arrangement they set a base rate of USD 1.13/AUD. There is a neutral zone that spans USD 1.0735/AUD to USD 1.1865/AUD. Exchange rate movement outside of this neutral zone is shared equally. Suppose the rate at maturity is USD 1.356/AUD. What is the realized contractual exchange rate at which they transact?

a.USD 1.215/AUD
b.USD 0.989/AUD
c.USD 1.356/AUD
d.USD 1.045/AUD
e.USD 1.13/AUD

 

 

Reference no: EM132999228

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