4) South of U.S. has exposure to TL and Danish kroner (DK). It has net inflows of TL300 million and net outflows of DK500 million. The present exchange rate of the TL is 8 vs USD while the present exchange rate of the DK is $.10. South has not hedged these positions. The TL and DK are highly correlated in their movements against the dollar. If the dollar weakens, then South will benefit or be adversely affected? Why (Show the calculations as to why)

5) South of US will receive SF200,000 in 360 days. Assume the following interest rates:

U.S 360-day borrowing rate 7%

Swiss 360-day borrowing rate 5%

US 360-day deposit rate 6%

Swiss 360 day deposit rate: 4%