International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick

Exercise 11

Suppose the rate of appreciation of the dollar relative to the yen over the next 90 days is normally distributed with a mean of -1% and a standard deviation of 3%. Use a spreadsheet program to graph the distribution of the future yen-dollar exchange rate. If the current spot exchange rate is ¥99/$, and the 90-day forward rate is ¥98.30 / $, describe the distribution of yen profits or losses from selling $5,000,000 forward