Christoph Hoffeman of Kapinsky Capital Geneva now believes the Swiss franc will appreciate versus the U.S. dollar in the coming six-months period. He has $100,000 to invest. The current spot rate is $0.5820/SF, the six-months forward rate is $0.5640/SF, and he expects the spot rates to reach $0.6250/SF in six months. Kapinskt Capital Geneva a. b. Assumptions Values Values Initial investment (funds available) $100,000 $100,000 Current spot rate (US$/Swiss franc) 0.5820 0.5820 Six-month forward rate (US$/Swiss franc) 0.5640 0.5640 Expected spot rate in six months (US$/Swiss franc) 0.6250 0.6250 a. Calculate Christoph's expected profit assuming a pure spot market speculation strategy. b. Calculate Christoph's expected profit assuming he buys or sells SF six months forward

Kapinskt Capital Geneva a. b. Assumptions Values Values Initial investment (funds available) $100,000 $100,000 Current spot rate (US$/Swiss franc) 0.5820 0.5820 Six-month forward rate (US$/Swiss franc) 0.5640 0.5640 Expected spot rate in six months (US$/Swiss franc) 0.6250 0.6250