1. Intel is scheduled to receive a payment of ¥100,000,000 in 90 days from Sony in connec- tion with a shipment of computer chips that Sony is purchasing from Intel. Suppose that the current exchange rate is ¥103 >$, that analysts are forecast- ing that the dollar will weaken by 1% over the next 90 days, and that the standard deviation of 90-day forecasts of the percentage rate of depreciation of the dollar relative to the yen is 4%.
a. Provide a qualitative description of Intel's transaction exchange risk.
b. If Intel chooses not to hedge its transaction exchange risk, what is Intel's expected dollar revenue?
c. If Intel does not hedge, what is the range of possible dollar revenues that incorporates 95.45% of the possibilities?
7. Go to the Wall Street Journal's Market Data Cen- ter (https://online.wsj.com/mdc/public/page/market data.html) and find New York closing prices for currencies. Calculate the 180-day forward premium or discount on the dollar in terms of the yen.