A UK company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is £0.005, while the forward rate is £0.0055. You expect the spot rate in 60 days to be £0.0053. How many dollars will you receive for the 5,000,000 yen 60 days from now?

Question

Quizplus · Accepted Answer

By selling yen forward at the forward rate of £0.0055, the company will receive 5,000,000 yen * £0.0055 = £27,500.

A UK Company Expects to Receive 5,000,000 Japanese Yen 60