GED corporation, located in the United States, has an account payable obligation of ¥800 million payable...

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GED corporation, located in the United States, has an accountpayable obligation of ¥800 million payable in one year to a bank inTokyo. The current spot rate is ¥115/$1.00 and the one-year forwardrate is ¥110/$1.00. The annual interest rate is 3 percent in Japanand 6 percent in the United States. GED can also buy a one-yearcall option on yen at the strike price of $0.0080 per yen for apremium of 0.010 cents per yen. At what one-year forward rate wouldGED be indifferent between money market hedging and forward markethedging?
a) ¥116/$1.00
b) ¥109/$1.00
c) ¥111.75/$1.00
d) ¥112.72/$1.00

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GED corporation, located in the United States, has an accountpayable obligation of ¥800 million payable in one year to a bank inTokyo. The current spot rate is ¥115/$1.00 and the one-year forwardrate is ¥110/$1.00. The annual interest rate is 3 percent in Japanand 6 percent in the United States. GED can also buy a one-yearcall option on yen at the strike price of $0.0080 per yen for apremium of 0.010 cents per yen. At what one-year forward rate wouldGED be indifferent between money market hedging and forward markethedging?a) ¥116/$1.00b) ¥109/$1.00c) ¥111.75/$1.00d) ¥112.72/$1.00