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What is the payoff of option

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XYZ Corporation, located in the United States, has an accounts payable obligation of ¥750 million payable in one year to a bank in Tokyo. The current spot rate is ¥116/$1.00 and the one year forward rate is ¥109/$1.00. XYZ can also buy a one-year call option on yen at the strike price of $0.0086 per yen. Assume that the forward rate is the best predictor of the future spot rate. What is the payoff of your option?

Reference no: EM132704955

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