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Question 4 (15 points). On March, A Japanese company expected to pay 1 million of USD in July.
The current spot exchange rate is 120 yen per dollar, September futures price is currently 128 yen
per dollar. At the end of July, the spot exchange rate is 122 yen per dollar and September futures
price is 125 yen per dollar. By hedging with the September futures contract, what is the net
exchange rate after hedging? How much the Japanese company will pay in terms of yen after
hedging?

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  • 1. Question 4 (15 points). On March, A Japanese company expected to pay 1 million of USD in July. The current spot exchange rate is 120 yen per dollar, September futures price is currently 128 yen per dollar. At the end of July, the spot exchange rate is 122 yen per dollar and September futures price is 125 yen per dollar. By hedging with the September futures contract, what is the net exchange rate after hedging? How much the Japanese company will pay in terms of yen after hedging?