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Answer :
The Japanese buyer would believe they are paying \$0.92 per pack. The currency exposure for Truckee Tec is \$110,500. The principal (notional principal) of the loan obligation needed to cover the exposure is \$112,609. The net exposure in Japanese yen remaining after the swap to Truckee is \$1,110.
The Japanese buyer would believe they are paying \$0.92 per pack because the final contract value is \$460,000 and the number of packs is 500,000.
The currency exposure for Truckee Tec is \$110,500 because the final contract value is \$460,000 and the exchange rate is 100 yen/$1.
The principal (notional principal) of the loan obligation needed to cover the exposure is \$112,609 because the currency exposure is \$110,500 and the interest rate is 3.5%, paid quarterly.
The net exposure in Japanese yen remaining after the swap to Truckee is \$1,110 because the principal of the loan obligation is \$112,609 and the exchange rate is 100 yen/$1.
The calculation of the currency exposure, principal of the loan obligation, and net exposure is shown below:
Currency exposure = Final contract value * Exchange rate = $460,000 * 100 yen/$1 = $110,500
Principal of the loan obligation = Currency exposure * (1 + Interest rate)^(Number of periods) = $110,500 * (1 + 0.035/4)^(4 * 3) = $112,609
Net exposure = Principal of the loan obligation * Exchange rate = $112,609 * 100 yen/$1 = $1,110
As you can see, the Japanese buyer would believe they are paying \$0.92 per pack, the currency exposure for Truckee Tec is \$110,500, the principal (notional principal) of the loan obligation needed to cover the exposure is \$112,609, and the net exposure in Japanese yen remaining after the swap to Truckee is \$1,110.
To learn more about currency exposure click here: brainly.com/question/32343715
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