Suppose that the US firm Halliburton buys construction equipment from the Japanese fim Komatsu at a price of ¥260 million The equipment is to be delivered to the United States and paid for in one year. The current exchange rate is 104-$1. The current interest rate on one-year U.S. Treasury bills is 7%, and on one-year Japanese government bonds the interest rate is 5% a If Halliburton exchanges dollars for yen today and invests the yen in Japan for one year, it will need $2380952.38 to exchange today in order to have 260 an on in one year (Round your response to the nearest dollar) b. If Halliburton enters a forward contract agreeing to buy v260 m Mon in one year at an exchange rate of ¥102-$1. it will need $2427637 72 today if it plans to invest the dollars at the US interest rate of 7%. (Round your response to the nearest dollar)

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Chapter1: Making Economics Decisions
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Suppose that the U.S. firm Halliburton buys construction equipment from the Japanese firm Komatsu at a price of
¥260 million. The equipment is to be delivered to the United States and paid for in one year. The current exchange
rate is 104 $1. The current interest rate on one-year U S. Treasury bills is 7%, and on one-year Japanese
government bonds the interest rate is 5%
a. If Halliburton exchanges dollars for yen today and invests the yen in Japan for one year, it will need $2380952.38
to exchange today in order to have ¥260 million in one year (Round your response to the nearest dollar)
b. If Halliburton enters a forward contract, agreeing to buy ¥260 million in one year at an exchange rate of ¥102=S1,
it will need $2427637 72 today if it plans to invest the dollars at the US interest rate of 7%. (Round your response
to the nearest dollar)
Transcribed Image Text:Suppose that the U.S. firm Halliburton buys construction equipment from the Japanese firm Komatsu at a price of ¥260 million. The equipment is to be delivered to the United States and paid for in one year. The current exchange rate is 104 $1. The current interest rate on one-year U S. Treasury bills is 7%, and on one-year Japanese government bonds the interest rate is 5% a. If Halliburton exchanges dollars for yen today and invests the yen in Japan for one year, it will need $2380952.38 to exchange today in order to have ¥260 million in one year (Round your response to the nearest dollar) b. If Halliburton enters a forward contract, agreeing to buy ¥260 million in one year at an exchange rate of ¥102=S1, it will need $2427637 72 today if it plans to invest the dollars at the US interest rate of 7%. (Round your response to the nearest dollar)
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