5. A Switzerland-based exporter of pharmaceuticals is owed EUR 850,000 by its Italian customer (EUR = Euro) in two years. The spot rates are S(USD/EUR) = 1.10 and S(USD/CHF) = 1.04 (USD = US Dollar, CHF = Swiss Franc); the interest rate in the US is ius=0.10%, the interest rate in Italy is i:=0.25%, and the interest rate in Switzerland is is=0.50%. Show how the Swiss exporter can cross hedge its exposure into CHF with a money market hedge. Assume that the Swiss exporter must borrow in t=0 to execute the money market hedge. Show the diagram of the transactions and compute the implied forward rate (CHF/EUR). 5. A Switzerland-based exporter of pharmaceuticals is owed EUR 850,000 by its Italian customer (EUR = Euro) in two years. The spot rates are S(USD/EUR) = 1.10 and S(USD/CHF) = 1.04 (USD = US Dollar, CHF = Swiss Franc); the interest rate in the US is ius=0.10%, the interest rate in Italy is i:=0.25%, and the interest rate in Switzerland is is=0.50%. Show how the Swiss exporter can cross hedge its exposure into CHF with a money market hedge. Assume that the Swiss exporter must borrow in t=0 to execute the money market hedge. Show the diagram of the transactions and compute the implied forward rate (CHF/EUR)