Business, 30.03.2021 16:00 briansalazar17

Consider a U. S.-based company that exports goods to Switzerland. The U. S. company expects to receive payment on a shipment of goods in three months. Because the payment will be in Swiss francs, the U. S. company wants to hedge against a decline in the value of the Swiss franc over the next three months. The U. S. risk-free rate is 2 percent, and the Swiss risk-free rate is 5 percent. Assume that interest rates are expected to remain fixed over the next six months. The current spot rate is $0.5974. a) Whether the U. S. company should use a long or short forward contract to hedge currency risk.
b) What is the the no-arbitrage price at which the U. S. Company could enter into a forward contract that expires in three months?
c) Thirty days later the spot rate is $0.55. What is the the value of the U. S. Companys forward position?

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Consider a U. S.-based company that exports goods to Switzerland. The U. S. company expects to recei...

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