Assume the following information:

360-day U.S. interest rate is 6.35%; 360-day Switzerland interest rate is 4.73%; the spot rate of the Swiss franc (CHF) is $0.7852 and the 360-day forward rate of the Swiss franc is $0.7941. Also assume that the Parker Company will need to pay CHF200,000 in 360 days and will have the money available in 360 days (not now) for this payment.

(a) Explain how the firm implements the money market hedge in this particular case.

(b) Describe the detailed steps and calculate the total amount needed in U.S. dollars in 360 days for the money market hedge. Be sure to show the details of your calculations.