Momomo is a construction company in Japan. Momomo is concerned on the depreciation of Japanese Yen in...

80.2K

Verified Solution

Question

Physics

Momomo is aconstruction company in Japan. Momomo is concerned on thedepreciation of Japanese Yen in the future. The company expected topay its supplier EUR 950,000 in Germany in three months. At thesame time, Momomo is expected to receive a payment of USD1,500,000from its customer, three months from now. The cost of capital forMomomo is 7.5%. The current spot rate is at JPY 109/USD andJPY120/EUR
The following information was given byMomomoâ€™s bank.
Exercise Price
Premium
Call option on Yen
JPY 115/USD
1.25%
Call option on Yen
JPY 126/EUR
0.95%
Put Option on Yen
JPY118/USD
1.23%
Put Option on Yen
JPY127/EUR
1.00%
How much is the minimum receipt that Momomo able to get if thecompany decides to perform option market hedge of its accountreceivable? State your answer in JPY
Answer:
Calculate the maximum cost that Momomo has to bear if thecompany decides to hedge its account payable using option. Stateyour answer in JPY.
Answer:

Answer & Explanation Solved by verified expert

4.1 Ratings (744 Votes)

Hi Dear Respected student Im glad to answer such a nicequestion for you I hope it helps I tried my best to provide youwith a quality answer with you I tried to utilize my See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

	Exercise Price	Premium
Call option on Yen	JPY 115/USD	1.25%
Call option on Yen	JPY 126/EUR	0.95%
Put Option on Yen	JPY118/USD	1.23%
Put Option on Yen	JPY127/EUR	1.00%