Question: A firm has just begun to do business in Japan and the financial manager anticipates approximately 10,000,000 japanese yen sales per month outstanding for approximately one month. He has not decided whether to hedge his receivables or not. To help decide, he has collected a small sample of prices reported in the table below. Interpret the table as follows: On January 15, the 30-day forward and spot rates of yen were $0.008778/Yen and $0.008752/Yen respectively. The actual spot rate on February 15 was $0.009654/Yen. Assuming sales of 10,000,000 yen each month, January 15 through May 15 collected one month later, what would the dollar receipts have been over this period with no hedge? What would they have been in 100% forward hedge? How might these results influence the decision to hedge?
1/15 0.008778 0.008752
2/15 0.009681 0.009654
3/15 0.008941 0.008912
4/15 0.009223 0.009191
5/15 0.008843 0.008815
6/15 ------------- 0.009111