Assume that Alpha Inc expects to need (payables) Japanese Yen 2 million in one year

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Assume that Alpha Inc expects to need (payables) Japanese Yen 2 million in one year. The existing spot rate of the Japanese Yen is S/Ven 0.60. The one-year forward rate of the Japan Yen is 5/Ven 0.62. Alpha Inc.created a probability distribution for the future spot rate in one year as follows: Future Spot Rate Probability 5.61 20% .64 30 .67 50 Assume that one-year call options on Japanese Yen are available with an exercise price of 5.64 and a premium of 5.03 per unit. Assume the following money market rates: U.S. Japan Deposit/Borrowing rate 8% 5% Required (show your working): a. Determine the cost in $ if Alpha Inc. use forward hedge, to hedge payables. b. Determine the cost in si Alpha Inc, use money market hedge, to hedge payables. c. Determine the expected cost in Sif Alpha Inc. use call options to hedge payables. d. Determine the expected cost in Sif there is no hedge. e. Determine which of the above hedge is most appropriate