Mendy's, a Canadian company, sells frozen food to Japan. Every month Mendy's receives a payment of JPY 15,000,000. The exchange rate is .01 CAD/JPY. The volatility (i.e., standard deviation) of the CAD/JPY exchange rate is .002. Provide a range for Mendy's exposure, measured in CAD? Without using futures, options, or a money market hedge, how would you recommend Mendy's to reduce its FX exposure?
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