Lost Pigeon Aviation, a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for ¥694 million, but the Japanese firm has 60 days before it must make the payment to Lost Pigeon Aviation The spot exchange rate is ¥132.78 per dollar, and the 60-day forward rate is ¥134.72 per dollar. Is the yen selling at a premium or at a discount in the forward market relative to the U.S. dollar? The yen is trading at a discount in the forward market. In the forward market, the yen is trading at a premium.
Lost Pigeon Aviation, a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for ¥694 million, but the Japanese firm has 60 days before it must make the payment to Lost Pigeon Aviation The spot exchange rate is ¥132.78 per dollar, and the 60-day forward rate is ¥134.72 per dollar. Is the yen selling at a premium or at a discount in the forward market relative to the U.S. dollar? The yen is trading at a discount in the forward market. In the forward market, the yen is trading at a premium.
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 1ST
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Lost Pigeon Aviation, a U.S. company, produces and exports industrial machinery overseas. It recently made a sale to a Japanese manufacturing firm for ¥694 million, but the Japanese firm has 60 days before it must make the payment to Lost Pigeon Aviation The spot exchange rate is ¥132.78 per dollar, and the 60-day forward rate is ¥134.72 per dollar. Is the yen selling at a premium or at a discount in the forward market relative to the U.S. dollar?
The yen is trading at a discount in the forward market.
In the forward market, the yen is trading at a premium.
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