A japanese IMPORTER has a $1,250,000 PAYABLE due in one year. The spot rate is $1V100. The one-year forward rate is $1V120. Forward contract size is V12,500,000. Detail a strategy using forward contracts that will hedge his exchange rate risk, OA. Go short in 12 yen forward contracts. OB. Go long in 12 yen forward contracts. OC. Go short in 16 yen forward contracts. D. Go long in 16 yen forward contracts.

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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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A japanese IMPORTER has a $1,250,000 PAYABLE due in one year. The spot rate is $1V100. The one-year forward rate is $1 V120. Forward contract
size is V12,500,000. Detail a strategy using forward contracts that will hedge his exchange rate risk.
A Go short in 12 yen forward contracts.
OB. Go long in 12 yen forward contracts.
C. Go short in 16 yen forward contracts.
D. Go long in 16 yen forward contracts.
Transcribed Image Text:A japanese IMPORTER has a $1,250,000 PAYABLE due in one year. The spot rate is $1V100. The one-year forward rate is $1 V120. Forward contract size is V12,500,000. Detail a strategy using forward contracts that will hedge his exchange rate risk. A Go short in 12 yen forward contracts. OB. Go long in 12 yen forward contracts. C. Go short in 16 yen forward contracts. D. Go long in 16 yen forward contracts.
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