Question
A swiss company doing business in the United States wants to lock in exchange rate risk by purchasing $50,000of U.S. currency at the six month
A swiss company doing business in the United States wants to lock in exchange rate risk by purchasing $50,000of U.S. currency at the six month forward rate.
Exchange rate per U.S. $1
Swiss franc spot rate 0.9312
1 month forward 0.9307
3month forward 0.9298
6 month forward 0.9284
U.K. pound spot rate 0.6541
1 month forward 0.6543
3 month forward 0.6547
6 month forward 0.6552
Based upon spot and forward rates in the table shown above, how much more would they be paying in Swiss francs to buy the U.S. currency at the six month forward rate than if they bought the same amount of currency at the spot rate?
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