Assume you are American and anticipate paying 50M SWF in 12-months' time associated with the purchase of equipment manufactured in Berne (Switzerland). The spot rate for SWF is 1.0130-90 USD/SWF and the swap rates for 12 months are -30 to -20. The lending and borrowing rates for USD and SWF are respectively 1.05% to 1.40% and 1.60% to 1.95% annually.

If you hedge in the money markets, in TODAY USD, your cost will be: (I accept rounding errors)

If you sell SWF in the forward market you will get 1.017 USD/SWF

Select one:

True

False

The USD is selling at a forward premium.

Select one:

True

False

If you lend money in the SWF money markets you will earn 1.60% on that debt.

Select one:

True

False

If you hedge in the forward markets, you should go long 50M SWF.

Select one:

True

False