Orangutan wigs inc wants to borrow 10 million for a period, Ask an Expert

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Orangutan Wigs, Inc. wants to borrow $10 million for a period of 1 year. In addition to being able to borrow in dollars (USD), it has the option to borrow this money in Japanese yen (JPY). The relevant interest rate and exchange rate information is provided below:

USD Interest Rate = 0.75%

JPY Interest Rate = 0.25%

Spot JPY/USD Exchange Rate = 92.2850 JPY/USD

1-year forward JPY/USD Exchange Rate = 92.39 JPY/USD

All interest is paid on an annual basis.

You are the CFO of Orangutan Wigs, Inc. Devise the zero-uncertainty, lowest-cost borrowing strategy for your company.

1- Borrow and repay in JPY (with zero-uncertainty):

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92317922

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