A U.S. MNC expects to receive ¥750 million from its customer one year from now. The...

A U.S. MNC expects to receive ¥750 million from its customer one year from now. The current spot rate is ¥116/$ and the one-year forward rate is ¥109/$. The annual interest rate is 3% on ¥ and 6% on USD. The put option on ¥ at the strike price of $0.0086/¥ with 1-year expiration costs 0.012 cent/¥, while the call option on ¥ at the strike price of $0.0080/¥ with 1-year expiration costs 0.009 cent/¥.

Construct forward hedging for the MNC. Evaluate the result of forward hedging.
Implement money market hedging (MMH) for the MNC. Evaluate the result of MMH.
Implement option hedging for the MNC. Conduct cash flow analysis to show the result of option
At what future spot rate would the MNC be indifferent between forward hedging and Money market hedging? Explain
At what future spot rate would the MNC be indifferent between option hedging and Money market hedging? At what future spot rate would the MNC prefer Money market hedging?
At what forward rate would the MNC be indifferent between forward hedging and Money market hedging? At what forward rate would the MNC prefer forward hedging?
How to hedge the receivable of ¥750 million if it is conditional on the acceptance of the bid.

Please show all work, thanks

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Expert Solution

ekkarill92 answered 1 year ago

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