Question

26 Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. If the spot rate turns out to be $.0090 in 60 days, how many dollars will you receive for the 5,000,000 yen at that time?

Answer 1

Answer:

$47,500

Explanation:

The computation of the dollars amount received for the 5,000,000 yen is shown below:

= Expected yen receivable × forward rate

= 5,000,000 × $.0095

= $47,500

To find out the dollar amount we multiply the Expected yen receivable  with the forward rate so that accurate value can come. And, we ignored the current spot rate and the turns out spot rate