Suppose a US firm just bought an asset from a Japanese firm for ¥500 million, due in one year. The spot exchange rate for Japanese yen is ¥122/$ and the one year forward exchange rate for Japanese yen is ¥130/$. The one-year interest rate is 5% in the U.S. and 12% in Japan. Calculate the dollar cost at the time of payment of meeting this obligation using a money market hedge.
a. $3,663,004
b. $3,485,000
c. $3,659,251
d. $3,842,214