Consider a U S based company that exports goods to Switzerland The U S company expects to receive payment on a shipment of goods in three months Because the payment will be in Swiss francs, the U S company wants to hedge against a decline in the value of the Swiss franc over the next three months The U S risk free rate is 4 percent, and the Swiss risk free rate is 7 percent Assume that interest rates are expected to remain fixed over the next six months The current spot rate is $0 5992 a Whether the U S company should use a long or short forward contract to hedge currency risk multiple choice Long position in forward contract Short position in forward contract b Calculate the no arbitrage price at which the U S company could enter into a forward contract that expires in three months (Do not round intermediate calculations Round your answer to 4 decimal places ) c It is now 30 days since the U S company entered into the forward contract The spot rate is $0 40 Interest rates are the same as before Calculate the value of the U S companys forward position (Negative amounts should be shown with a minus sign Do not round intermediate calculations Round your answer to 4 decimal places )

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Consider a U.S.-based company that exports goods to Switzerland. The U.S. company expects to receive payment on a shipment of goods in three months. Because

Consider a U.S.-based company that exports goods to Switzerland. The U.S. company expects to receive payment on a shipment of goods in three months. Because the payment will be in Swiss francs, the U.S. company wants to hedge against a decline in the value of the Swiss franc over the next three months. The U.S. risk-free rate is 4 percent, and the Swiss risk-free rate is 7 percent. Assume that interest rates are expected to remain fixed over the next six months. The current spot rate is $0.5992.

a. Whether the U.S. company should use a long or short forward contract to hedge currency risk.

multiple choice

Long position in forward contract
Short position in forward contract

b. Calculate the no-arbitrage price at which the U.S. company could enter into a forward contract that expires in three months. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

c. It is now 30 days since the U.S. company entered into the forward contract. The spot rate is $0.40. Interest rates are the same as before. Calculate the value of the U.S. companys forward position. (Negative amounts should be shown with a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places.)