Answered: Princess Cruise Company (PCC) purchased…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry for 700 million Japanese yen payable in one year. The current spot rate is ¥120/$ and the one-year forward rate is ¥105/$. The annual interest rate is 6% in Japan and 9% in the United States. What is the future dollar cost of meeting this obligation using the money market hedge?

Question 6 options:


a)	$6,483,180

b)	$5,672,783

c)	$6,855,347

d)	$7,779,816

e)	$5,998,428..

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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