Suppose a US firm has just bought an asset from a Japanese firm for ¥500 million, due in one year. The spot exchange rate for Japanese yen is ¥122/$ and the one-year forward exchange rate for Japanese yen is ¥130/$. The one-year interest rate is 5% in the US and 12% in Japan. Calculate today's dollar cost of meeting this obligation using a money market hedge.

You are the owner of a local honda dealership. unlike other dealerships in the area, you take pride in your “no haggle” sales policy. last year, your dealership earned record profits of $1.5 million. however, according to the local chamber of commerce, your earnings were 10 percent less than either of your competitors. in your market, the price elasticity of demand for midsized honda automobiles is 4.5. in each of the last five years, your dealership has sold more midsized automobiles than any other honda dealership in the nation. this entitled your dealership to an additional 30 percent off the manufacturer’s suggested retail price (msrp) in each year. taking this into account, your marginal cost of a midsized automobile is $11,000. what price should you charge for a midsized automobile if you expect to maintain your record sales?