1. If the spot rate for Swiss Francs versus US Dollars is one SF equals 1.05 US$, and the annual interest rate on fixed rate one-year deposits of SF is 0.5% and for US$ is 1.75%, what is the nine-month forward rate for one SF in terms of dollars [$]? Assuming the same interest rates, what is the 18-month forward rate for one US$ in SF? Is this a direct or an indirect rate? If the forward rate is an accurate predictor of exchange rates, in this case will the SF get stronger or weaker against the US dollar? What does this indicate about the markets inflation expectations in Switzerland compared to the US?

2. On January 2d, 2017, Boeing expects to send 5 787s from its plant in Seattle, WA to Swiss Air, which it will sell on 270-day terms at $125 million each. Thus Boeing will receive payment from Swiss Air on September 27^th, 2017. Assuming Swiss Air wants to hedge against a stronger US$ using a forward contract with a Swiss bank in the US, what is the amount of SF they should pay the Swiss Bank for dollars to pay Boeing on September 27^th, 2017 given the nine month forward rate for one SF in terms of dollars that you calculated in problem one? What are two other ways Swiss Air might hedge its US$/SF exposure?