A Japanese exporter has a €1,000,000 receivable due in one year.Detail a strategy using a money market hedge that will eliminate any exchange rate risk.

\begin{array}{l}1 \text {-year rates of interest }\\\begin{array} { l r r } & \text { Borrowing } & \text { Lending } \\\text { Dollar } & 4.5 \% & 4.00 \% \\\text { Euro } & 6.009 & 5.25 \% \\\text { Yen } & 1.00 \% & 0.75 \%\end{array}\end{array}

\begin{array}{lrl}\text { Spot exchange rates } & \text { 1-year Forward Rates } \\\$ 1.25=€ 1.0 C & \$ 1.2262=€ 1.00 \\\$ 1.00=¥ 10 C & \$ 1.03= ¥ 100\end{array}

A)Borrow €970,873.79 today.Convert the euro to dollars at the spot exchange rate,receive $1,165,048.54.Convert these dollars to yen at the spot rate,receive ¥.
B)Borrow €943,396.22 today.Convert the euro to dollars at the spot exchange rate,convert these dollars to yen at the spot rate,receive ¥117,924,528.30.
C)Lend €943,396.22 today.Convert the euro to dollars at the spot exchange rate,convert these dollars to yen at the spot rate.
D)Convert ¥117,924,528.30 to dollars at the spot rate; convert dollars to euro at the spot rate; lend €943,396.22 at 5.25 percent.

If Default Costs Are Significant

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