An American company imported a shipment from Japan valued at $1,136,000,000. According to the contract, the importer Payment will be made after three months. At that time, the exchange rate of yuan against US dollar was on the upward trend. In order to avoid the loss of C] payment, American importers decided to use forward contracts to protect against currency risk. Here's what's going on in the New York currency market:
At the spot exchange rate: USD 1 = JPY141.00/142.00
The three-month forward yen premium JPY0.5-0.4
(1) What is the dollar cost of this batch of imported goods for hedging through a forward foreign exchange contract?
(2) If the American importer hedges, after 3 months, the spot exchange rate of 8 yuan to the US dollar will be
USD1=JPY139.00/141.00, how much will the dollar expenditure of the C] merchant be increased?
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