Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract. The current spot rate is ¥150/$1 and the 90-day forward rate is ¥149/$1. If the spot rate in 90 days is ¥154/$, how much has this forward market hedge cost PepsiCo? a) $173,160 b) $44,743 c) Pepsi gains $173,160 from the forward contract d) Pepsi gains $217,903 from the forward contract

Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract. The current spot rate is ¥150/$1 and the 90-day forward rate is ¥149/$1. If the spot rate in 90 days is ¥154/$, how much has this forward market hedge cost PepsiCo? a) $173,160 b) $44,743 c) Pepsi gains $173,160 from the forward contract d) Pepsi gains $217,903 from the forward contract

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter21: International Cash Management

Section: Chapter Questions

Problem 8QA

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Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract. The current spot rate is ¥120/$1 and the 90‑day forward rate is ¥129/$1. If the spot rate in 90 days is ¥125/$, how much has this forward market hedge cost PepsiCo? Group of answer choices $581,395 Pepsi gains $581,395 from the forward contract $248,062 Pepsi gains $248,062 from the forward contract
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