3. you plan to visit geneva, switzerland in three months to attend an international business conference. you expect to incur the total cost of sf 5,000 for lodging, meals and transportation during your stay. as of today, the spot exchange rate is $0.60/sf and the three-month forward rate is $0.63/sf. you can buy the three-month call option on sf with the exercise rate of $0.64/sf for the premium of $0.05 per sf. assume that your expected future spot exchange rate is the same as the forward rate. the three-month interest rate is 6 percent per annum in the united states and 4 percent per annum in switzerland. (a) calculate your expected dollar cost of buying sf5,000 if you choose to hedge via call option on sf. (b) calculate the future dollar cost of meeting this sf obligation if you decide to hedge using a forward contract. (c) at what future spot exchange rate will you be indifferent between the forward and option market hedges? (d) illustrate the future dollar costs of meeting the sf payable against the future spot exchange rate under both the options and forward market hedges.

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

answer; coefficient of correlation;

answer; only identify and interpret trends in the marketplace;