IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥270 million payable in six months

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answerhappygod
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IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ¥270 million payable in six months

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IBM purchased computer chips from NEC, a Japanese electronicsconcern, and was billed ¥270 million payable in six months.Currently, the spot USD/JPY rate is 106 and the six-month forwardrate is 101. The six-month money market interest rate is 4.0percent per annum in the U.S. and 1.4 percent per annum in Japan.The management of IBM decided to use the money market hedge to dealwith this yen account payable. Calculate today's dollar cost ofmeeting this yen obligation. (USD, no cents)
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