Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry for 560 million yen...
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Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry for 560 million yen payable in one year. The current spot rate is 127 per dollar and the one-year forward rate is 113 per dollar. The annual interest rate is 5 percent in Japan and 8 percent in the United States. PCC can also buy a one-year call option on yen at the strike price of $0.0078 per yen for a premium of 0.0140 cents per yen. Note: A Negative value should be indicated with a minus sign. Do not round intermediate calculations. Round your final answer in whole dollars not in millions. Required: a. Compute the future dollar costs of meeting this obligation using the money market and forward hedges.
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