I am willing to pay 50 for all The U. S- based MNC Conte has receivables of JPY 5 million in three months.
Please help me with the following questions, I need answers in about 45 min. I am willing to pay 50 for all
The U. S- based MNC Conte has receivables of JPY 5 million in three months. The spot JPYUSD is 0.0085. The firm’s economist forecasts that the JPYUSD could end the period with a value of either 0.00825 (probability of 45 percent) or 0.00875 (55 percent). The firm is concerned about its currency risk. It has also assessed some hedging alternatives. Three- month JPY forward contracts are traded at USD 0.00855. The three- month interest rates (annual compounding) in the United States and Japan are 3 percent and 0.5 percent, respectively. Put options with three- month expiration and a strike price of USD 0.00850 are available for a premium of USD 0.00027. What is the expected cash flow (and the corresponding standard deviation) if company uses options hedge? (use $x,xxx and $x,xxx)