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4. Due to COVID-19 situation, the Fed launched a series of the USD is depreciating against other major currencies. US corporations afraid this depreciation of
4. Due to COVID-19 situation, the Fed launched a series of the USD is depreciating against other major currencies. US corporations afraid this depreciation of USD creates pressure on their Swiss Franc payable. One corporate customer comes to the bank that you work for to hedge the CHF 1.5 million payable due in 10 months. The following information shows up on your screen: Spot exchange rate: SFr 0.9103/$ - SFr 0.9123/$ US 10-month interest rates are 0.75% for investing and 3.49% for borrowing. CHF 10-month interest rates are 0.25% for investing and 1.89% for borrowing. Please remember: Interest rates are quoted as annualized rate. The bank that you work for demands a 0.55% profit margin for all forward contract. How much is the forward quotation that you will provide to your corporate customer. (30 points) 4. Due to COVID-19 situation, the Fed launched a series of the USD is depreciating against other major currencies. US corporations afraid this depreciation of USD creates pressure on their Swiss Franc payable. One corporate customer comes to the bank that you work for to hedge the CHF 1.5 million payable due in 10 months. The following information shows up on your screen: Spot exchange rate: SFr 0.9103/$ - SFr 0.9123/$ US 10-month interest rates are 0.75% for investing and 3.49% for borrowing. CHF 10-month interest rates are 0.25% for investing and 1.89% for borrowing. Please remember: Interest rates are quoted as annualized rate. The bank that you work for demands a 0.55% profit margin for all forward contract. How much is the forward quotation that you will provide to your corporate customer. (30 points)
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