61) A U.S. firm holds an asset in Great Britain and faces the following scenario: State 1 State 2 State 3 Probability 25% 50% 25% Spot rate $ 2.50 / $ 2.00 / $ 1.60 / P* 1,800 2,250 2,812.50 P $ 4,500 $ 4,500 $ 4,500 where, P * = Pound sterling price of the asset held by the U.S. firm P = Dollar price of the same asset

Which of the following would be an effective hedge?

Sell 2,278.13 forward at the 1-year forward rate, F1($/), that prevails at time zero.

Buy 2,500 forward at the 1-year forward rate, F1($/), that prevails at time zero.

Sell 25,000 forward at the 1-year forward rate, F1($/), that prevails at time zero.

none of the options

57)

Your firm is a Swiss exporter of bicycles. You have sold an order to a French firm for 4,000,000 worth of bicycles. Payment from the French firm (in euro) is due in 12 months. Use a money market hedge to redenominate this one-year receivable into a Swiss franc -denominated receivable with a one-year maturity.

Pair			Int rates
GBP/USD	Spot	1.3037	3.1% UK
	12M FWD	1.3162
EUR/USD	Spot	1.1276	2.1% Euro zone
	12M FWD	1.1358
USD/CHF	Spot	0.9305	0.7% Swiss
	12M FWD	0.9401
USD			3.6%