Problem: You are assigned the duty of ensuring the availability of 100,000 yen for the payment that is scheduled for the next month. Considering that your company possesses only U.S. dollars, identify the spot and forward exchange rates. What are the factors that affect your decision of utilizing spot versus forward exchange rates? Which one would you choose? How many dollars do you have to spend to acquire the amount of yen required?
Key currency cross rates for U.S. is .00904
Spot Rate JPY/USD 0.009035 Monday 0.008993 Friday
Table 1. Monthly outright forward rates
Period
1 Month 0.009035
2 Months 0.009048
3 Months 0.009074
6 Months 0.009124
Source: from the wall street journal,august 3, 2004