Asked by Harry

Suppose that the current Bid-Offer on the Yen is $0.0089/¥ and $0.0091/¥, and the three-month forward is $0.0094/¥.

1. If you wish to hedge 10,000,000 Yen Obligation due in three months, what position would you take? Explain why.
a. Buy Yen forward at $0.0089/¥
b. Sell Dollars forward at $0.0091/¥
c. Sell Yen forward at $0.0094/¥
d. Buy Dollars forward at $0.0094/¥
e. Buy Yen forward at $0.0094/¥
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