CMA Study Group

  • 1.  Forex

    Posted 27 days ago
    Baljit Inc. purchased machinery from a Japanese firm and will have to pay ¥278,450,000 in 90 days. Baljit has three choices: (1) wait 90 days and purchase the Yen on the spot market on settlement date, (2) enter into a forward contract with a rate of ¥105.46/$ to buy the required Yen on the settlement date, or (3) purchase the Yen today on the spot market at a rate of ¥102.50/$. The risk-free rate is 6% in both Japan and the US. What is the cost today if Baljit purchases the Yen today on the spot market?


    Syed Yousuf Jamal