P&G India. Procter and? Gamble’s affiliate in? India, P&G? India, procures much of its toiletries product line from a Japanese company. Because of the shortage of working capital in?India, payment terms by Indian importers are typically 180 days or longer.? P&G India wishes to hedge an 8.8 million Japanese yen payable. Although options are not available on the Indian rupee?(Rs), forward rates are available against the yen.? Additionally, a common practice in India is for companies like? P&G India to work with a currency agent who? will, in this? case, lock in the current spot exchange rate in exchange for a 4.72% fee. Using the exchange rate and interest rate data in the popup? window, LOADING…?, compare alternate ways below that? P&G India might deal with its foreign exchange exposure. Assume a? 360-day financial year.
a. How much in Indian rupees will? P&G India pay in 180 days without a hedge if the expected spot rate in 180 days is assumed to be¥2.48558?/Rs?¥2.3601?/Rs?¥2.6086?/Rs?
b. How much in Indian rupees will? P&G India pay in 180 days with a forward market? hedge?
c. How much in Indian rupees will? P&G India pay in 180 days with a money market? hedge?
d. How much in Indian rupees will? P&G India pay in 180 days with a currency agent? hedge?
