Suppose PepsiCo Hedges a ¥1 Billion Dividend It Expects to Receive

Multiple Choice

Suppose PepsiCo hedges a ¥1 billion dividend it expects to receive from its Japanese subsidiary in 90 days with a forward contract.The current spot rate is ¥150/$1 and the 90-day forward rate is ¥149/$1.If the spot rate in 90 days is ¥154/$,how much has this forward market hedge cost PepsiCo?

A) $173,160
B) $44,743
C) Pepsi gains $173,160 from the forward contract
D) Pepsi gains $217,903 from the forward contract